-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BxZ3k6PbR5oj23GDG0SbShLyTGh6002njlnoejixD0JDqjrnw76g+FHvOBdKegl4 XkHX9Xr7bO+2BRxf9RvcIQ== 0000950168-01-500763.txt : 20010713 0000950168-01-500763.hdr.sgml : 20010713 ACCESSION NUMBER: 0000950168-01-500763 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010712 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION CORP CENTRAL INDEX KEY: 0000036995 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 560898180 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10000 FILM NUMBER: 1679190 BUSINESS ADDRESS: STREET 1: ONE FIRST UNION CTR CITY: CHARLOTTE STATE: NC ZIP: 28288-0013 BUSINESS PHONE: 7043746565 MAIL ADDRESS: STREET 1: ONE FIRST UNION CENTER CITY: CHARLOTTE STATE: NC ZIP: 28288-0013 FORMER COMPANY: FORMER CONFORMED NAME: CAMERON FINANCIAL CORP DATE OF NAME CHANGE: 19750522 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION NATIONAL BANCORP INC DATE OF NAME CHANGE: 19721115 8-K 1 form8-k_75243.txt FIRST UNION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) July 12, 2001 ------------- First Union Corporation ------------------------ (Exact name of registrant as specified in its charter) North Carolina 1-10000 56-0898180 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) One First Union Center Charlotte, North Carolina 28288-0013 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (704) 374-6565 ------------------------------ (Former name or former address, if changed since last report.) Item 5. Other Events. On July 12, 2001, First Union Corporation ("First Union") issued a news release announcing its financial results for the second quarter ended June 30, 2001 (the "News Release"). The News Release is attached as Exhibit 99(a) to this report and is incorporated into this Item 5 by reference. Item 7. Financial Statements and Exhibits. (c) Exhibits. 99(a) The News Release. 99(b) The Supplemental Earnings Package (as defined below). 99(c) The Earnings Slide Presentation (as defined below). Item 9. Regulation FD Disclosure. On July 12, 2001, in connection with First Union's issuance of the News Release, First Union released its Second Quarter 2001 Supplemental Earnings Package (the "Supplemental Earnings Package") and 2nd Quarter 2001 Earnings Review slide presentation (the "Earnings Slide Presentation" and, together with the Supplemental Earnings Package, the "Supplemental Materials"), which include certain additional historical and forward-looking financial information relating to First Union. In addition, on July 12, 2001, First Union intends to hold a conference call/webcast to discuss the News Release and the Supplemental Materials. The Supplemental Earnings Package and the Earnings Slide Presentation are attached as Exhibits 99(b) and 99(c), respectively, to this report and are incorporated into this Item 9 by reference. * * * This Current Report on Form 8-K (including information included or incorporated by reference herein), and any statements made by First Union in the conference call, may contain, among other things, certain forward-looking statements with respect to each of First Union, Wachovia Corporation ("Wachovia") and the combined company following the proposed merger between First Union and Wachovia (the "Merger"), as well as the goals, plans, objectives, intentions, expectations, financial condition, results of operations, future performance and business of First Union and/or the combined company, including, without limitation, (i) statements relating to the benefits of the Merger, including future financial and operating results, cost savings, enhanced revenues, and the accretion to reported earnings that may be realized from the Merger, (ii) statements regarding certain of First Union's and/or the combined company's goals and expectations with respect to earnings, earnings per share, revenue, expenses, and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (iii) statements preceded by, followed by or that include the words "may", "could", "would", "should", "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets" "probably", "potentially", "projects" or similar expressions. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond First Union's control). The following factors, among others, could cause First Union's and/or the combined company's financial performance to differ materially from the goals, plans, objectives, intentions, and expectations expressed in such forward-looking statements: (1) the risk that the businesses of First Union and Wachovia will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the Merger may not be fully realized or realized within the expected time frame; (3) revenues following the Merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the Merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the Merger on the proposed terms and schedule; (6) the failure of First Union's and Wachovia's stockholders to approve the Merger; (7) the strength of the United States economy in general and the strength of the local economies in which First Union and/or the combined company conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on First Union's and/or the combined company's loan portfolio and allowance for loan losses; (8) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (9) inflation, interest rate, market and monetary fluctuations; (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on First Union's and/or the combined company's capital markets and capital management activities, including, without limitation, its mergers and acquisition advisory business, equity and debt underwriting activities, private equity investment activities, derivative securities activities, investment and wealth management advisory businesses, and brokerage activities; (11) the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; (12) the willingness of customers to accept third party products marketed by First Union and/or the combined company; (13) the willingness of customers to substitute competitors' products and services for First Union's and/or the combined company's products and services and vice versa; (14) the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities and insurance); (15) technological changes; (16) changes in consumer spending and saving habits; (17) the effect of corporate restructurings, acquisitions and/or dispositions, including, without limitation, the Merger, and the actual restructuring and other charges related thereto; (18) the growth and profitability of First Union's and/or the combined company's noninterest or fee income being less than expected; (19) unanticipated regulatory or judicial proceedings; (20) the impact of changes in accounting policies by the Securities and Exchange Commission; (21) adverse changes in the financial performance and/or condition of First Union's and/or the combined company's borrowers which could impact the repayment of such borrowers' outstanding loans; and (22) the success of First Union and the combined company at managing the risks involved in the foregoing. Additional information with respect to factors that may cause actual results to differ materially from those contemplated by such forward-looking statements is included in the reports filed by First Union with the Securities and Exchange Commission. First Union cautions that the foregoing list of factors is not exclusive. All subsequent written and oral forward-looking statements concerning the Merger or other matters and attributable to First Union or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. First Union does not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this Current Report on Form 8-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FIRST UNION CORPORATION Date: July 12, 2001 By: /s/ James H. Hatch -------------------------------------- Name: James H. Hatch Title: Senior Vice President and Corporate Controller (Principal Accounting Officer) Exhibit Index Exhibit No. Description ----------- ----------- 99(a) The News Release. 99(b) The Supplemental Earnings Package. 99(c) The Earnings Slide Presentation. EX-99.A 2 ex99-a_75243.txt THE NEWS RELEASE EXHIBIT 99(a) NEWS [First Union logo appears here] Thursday Media Contact: July 12, 2001 Ginny Mackin 704-383-3715 Mary Eshet 704-383-7777 Investor Contact: Alice Lehman 704-374-4139 FIRST UNION REPORTS OPERATING EARNINGS OF $649 MILLION, OR 66 CENTS PER SHARE IN 2nd QUARTER 2001 CEO Thompson says First Union has momentum and proposed First Union-Wachovia merger will leverage strengths to continue building value for shareholders SECOND QUARTER 2001 OVERVIEW o Cash operating earnings of 73 cents per share; operating earnings of 66 cents, exceeding market expectations. o Outstanding results in the General Bank, with revenue up 9 percent and operating earnings up 28 percent from second quarter 2000. o Core deposits grew 4 percent, excluding divested businesses. o Operating expense decreased 8 percent from second quarter 2000. o Net charge-offs of 0.52 percent declined 17 basis points from second quarter 2000. o Tier 1 capital ratio improved for the fourth consecutive quarter, to 7.40 percent. - -------------------------------------------------------------------------------- Earnings Highlights Three Months Ended June 30, March 31, June 30, --------------------------------- (In millions, except per share data) 2001 2001 2000 - -------------------------------------------------------------------------------- Earnings Operating earnings (a) $ 649 610 714 Diluted earnings per share (Operating earnings) 0.66 0.62 0.73 Net income (As reported) 633 584 (2,199) Diluted earnings per share (As reported) $ 0.64 0.59 (2.27) - -------------------------------------------------------------------------------- Financial ratios (Operating earnings) Return on average stockholders' equity 16.19 % 15.64 17.74 Overhead efficiency ratio 64.34 65.18 64.36 Net interest margin 3.41 3.42 3.51 Fee and other income as % of total revenue 48.32 47.13 47.50 Dividend payout ratio 36.36 % 38.71 65.75 - -------------------------------------------------------------------------------- Cash operating earnings Net income $ 723 684 807 Diluted earnings per share $ 0.73 0.69 0.82 Return on average tangible stockholders' equity 23.35 % 22.91 30.18 Overhead efficiency ratio 62.06 % 62.80 61.64 - -------------------------------------------------------------------------------- Asset quality Allowance as % of nonaccrual and restructured loans 144 % 143 215 Net charge-offs as % of average loans, net 0.52 0.53 0.69 Nonperforming assets to loans, net, foreclosed properties and assets held for sale 1.23 % 1.30 0.87 - -------------------------------------------------------------------------------- (a) Operating earnings are reported net income excluding after tax net restructuring, merger-related and other charges and gains. - -------------------------------------------------------------------------------- Note: The first half of 2000 included the results of businesses that were divested in connection with the strategic repositioning announced in June 2000, as well as extraordinarily strong principal investing revenue. -- more -- FIRST UNION REPORTS 2ND QUARTER EARNINGS/Page 2 CHARLOTTE, N.C. - First Union (NYSE:FTU) today reported second quarter 2001 cash operating earnings of $723 million, or 73 cents per share; operating earnings of $649 million, or 66 cents per share; and net income of $633 million, or 64 cents per share. Highlights of the quarter included broad revenue growth, solid expense control, strengthened capital ratios and improved loan losses. In the six months ended June 30, 2001, cash operating earnings were $1.4 billion, or $1.43 per share; operating earnings were $1.3 billion, or $1.28 per share; and net income was $1.2 billion, or $1.23 per share. The cash operating return on average tangible stockholders' equity was 23.35 percent in the second quarter of 2001. Cash operating earnings are operating earnings before goodwill and other intangible amortization. Based on second quarter 2001 operating earnings, First Union's return on average stockholders' equity was 16.19 percent. "These strong operating results underscore First Union's momentum. We are extremely pleased with the revenue growth in all of our businesses this year, particularly the excellent results from our General Bank," said Ken Thompson, First Union chairman and CEO. "In addition, capital ratios improved, credit quality was stable and expenses decreased as expense management becomes more and more a part of our culture. "With our restructuring now complete, we are seeing the results, which we believe provide us a firm foundation for continued growth. We achieved these solid results while continuing to make excellent progress on planning for a smooth integration with our merger partner, Wachovia. This is exactly the right platform to leverage our strengths, and continue building value for shareholders. We have enormous optimism about our future together," he said. Net Interest Income Net interest income on a tax-equivalent basis was $1.7 billion in the second quarter of 2001, a 10 percent decline from $1.9 billion in the second quarter of 2000, largely due to the reduction in earning assets related to the sale of loans and securities in connection with First Union's strategic repositioning announced in June 2000. The net interest margin was 3.41 percent in the second quarter of 2001 and 3.51 percent in the second quarter of 2000. Fee and Other Income On an operating basis, fee and other income in the second quarter of 2001 was $1.6 billion, down 7 percent from the second quarter of 2000, attributable to a $263 million decline in principal investing revenue, partially offset by across-the-board growth in other fee income categories. On an operating basis, fee and other income as a percentage of total revenue was 48 percent in the second quarter of 2001 and 47 percent in the second quarter of 2000. Provision for Loan Losses The loan loss provision was $223 million in the second quarter of 2001, a decline of $5 million from the second quarter of 2000. The provision exceeded net charge-offs by $66 million. At June 30, 2001, the ratio of allowance to net loans increased to 1.44 percent from 1.33 percent at June 30, 2000. -- more -- FIRST UNION REPORTS 2ND QUARTER EARNINGS/Page 3 Noninterest Expense On an operating basis, noninterest expense was $2.2 billion in the second quarter of 2001, down 8 percent from the second quarter of 2000, reflecting the winding down of divested businesses and solid expense control. Restructuring and Other Charges and Gains Restructuring and other charges and gains in the second quarter of 2001, primarily related to the 2000 strategic repositioning, amounted to a pre-tax charge of $27 million ($16 million after-tax) or 2 cents per share. Net Charge-offs and Nonperforming Assets Net charge-offs amounted to $157 million in the second quarter of 2001, a decrease of $71 million from the second quarter of 2000. This represented 0.52 percent of average net loans, down 17 basis points from the second quarter of 2000. At June 30, 2001, nonperforming assets were $1.6 billion, or 1.23 percent of net loans, foreclosed properties and assets held for sale, an increase of 30 percent from June 30, 2000. Second quarter 2001 nonperforming assets included $250 million of nonperforming assets classified as held for sale. Lines of Business - -------------------------------------------------------------------------------- General Bank Highlights Three Months Ended June 30, March 31, June 30, ------------------------------------- 2001 2001 2000 - -------------------------------------------------------------------------------- (In millions) Total revenue $ 1,545 1,453 1,412 Provision for loan losses 98 101 51 Noninterest expense 935 908 966 Operating earnings 343 295 268 Average loans, net 65,501 63,771 58,105 Average core deposits 99,424 98,415 97,499 Economic capital $ 3,744 3,618 3,555 - -------------------------------------------------------------------------------- The General Bank has three major business lines: Consumer, Commercial and Small Business. General Bank total revenue increased 9 percent from the second quarter of 2000. The General Bank produced record consumer loan volume and solid deposit growth in the second quarter of 2001, reflecting improved sales production, a beneficial rate environment and a renewed focus on attracting low cost core deposits. Fee and other income grew 30 percent year over year, led by higher mortgage-related income, service charges and other fee income. The Consumer provision increased $31 million, of which $18 million was related to a market valuation adjustment on nonperforming assets moved to assets held for sale and increased charge-offs on a more seasoned First Union Home Equity portfolio. -- more -- FIRST UNION REPORTS 2ND QUARTER EARNINGS/Page 4 The Commercial and Small Business provisions increased $16 million. The impact of expense control initiatives was reflected in a 3 percent decline in noninterest expense from the second quarter of 2000 and an operating overhead efficiency ratio that improved from 67 percent in the second quarter of 2000 to 59 percent in the second quarter of this year. Average loans increased 13 percent from the second quarter of 2000, with across-the-board strength in consumer lending, while commercial real estate and small business lending drove commercial lending growth. Average core deposits grew 2 percent from the second quarter of 2000, primarily in low cost interest checking, savings and money market accounts. Overall customer satisfaction scores as measured by Gallup improved for the ninth consecutive quarter. Household retention also remained strong. Online customer growth continued to be rapid, with a 55 percent increase from June 30, 2000, to 2.9 million enrollments at June 30, 2001. This included 130,000 online wholesale enrollments, which grew 136 percent from June 30, 2000. - -------------------------------------------------------------------------------- Capital Management Highlights Three Months Ended June 30, March 31, June 30, ------------------------------------- 2001 2001 2000 - -------------------------------------------------------------------------------- (In millions) Total revenue $ 838 831 829 Provision for loan losses - - - Noninterest expense 667 659 624 Operating earnings 113 113 135 Average loans, net 4,559 4,497 4,250 Average core deposits 7,976 8,003 7,888 Economic capital $ 986 985 972 - -------------------------------------------------------------------------------- Capital Management includes Retail Brokerage Services, Asset Management, and Wealth and Trust Services. These businesses, with their balanced approach and multiple channels of distribution, performed solidly in the second quarter of 2001 as mutual fund assets and annuity sales through the bank channel reached an all-time high. Total revenue increased modestly from the second quarter of 2000 primarily due to increased brokerage production largely related to annuity sales, as well as the impact of the acquisitions since the second quarter of 2000. Noninterest expense increased 7 percent from the second quarter of 2000, primarily due to increased corporate allocations and these acquisitions. In partnership with the General Bank, bank channel annuity sales reached a quarterly record of $717 million in the second quarter of 2001, a 54 percent increase from the second quarter of 2000. Mutual fund assets grew to a quarter-end record $90 billion, up 6 percent from year-end 2000, driven by strong money market inflows. Assets under management increased modestly from year-end 2000 to $172 billion at June 30, 2001. Assets under management include $82 billion in trust assets in addition to the $90 billion in mutual fund assets. -- more -- FIRST UNION REPORTS 2ND QUARTER EARNINGS/Page 5 - -------------------------------------------------------------------------------- Corporate and Investment Banking Highlights Three Months Ended June 30, March 31, June 30, ------------------------------------- 2001 2001 2000 - -------------------------------------------------------------------------------- (In millions) Total revenue $ 773 725 897 Provision for loan losses 93 70 126 Noninterest expense 490 467 509 Operating earnings 153 150 199 Average loans, net 41,145 42,511 42,787 Average core deposits 10,202 9,465 8,928 Economic capital $ 6,112 6,278 5,940 - -------------------------------------------------------------------------------- Our Corporate and Investment Banking businesses offer a range of fixed income products, debt and equity products, structured products and advisory services for corporate and institutional clients. Total revenue declined 14 percent from the second quarter of 2000, primarily related to anticipated lower principal investing revenue, which was down $263 million from a strong second quarter of 2000. Excluding principal investing, revenue increased 21 percent and operating earnings were up 200 percent from the second quarter of 2000, reflecting broad line of business growth. Fixed income fee and other income increased 53 percent from the second quarter of 2000, primarily driven by fixed income sales and trading. The agency businesses, primarily merger and acquisition advisory services, loan syndications and equity capital markets, grew 3 percent from the second quarter of 2000. Noninterest expense decreased 4 percent from the second quarter of 2000. --- First Union (NYSE:FTU), with $246 billion in assets and stockholders' equity of $16 billion at June 30, 2001, is a leading provider of financial services to 15 million retail and corporate customers throughout the East Coast and the nation. The company operates full-service banking offices in 11 East Coast states and Washington, D.C., and full-service brokerage offices in 47 states. Online banking and brokerage products and services can be accessed through www.firstunion.com. Earnings Conference Call First Union Chairman and CEO Ken Thompson and CFO Bob Kelly will review First Union's second quarter results in a conference call and audio webcast beginning at 9 a.m. today. Supplemental materials relating to the second quarter results are available on the Internet at www.ftuinvestor.com, and investors are encouraged to access such materials. Webcast Instructions: To gain access to the webcast, which will be "listen-only," go to www.ftuinvestor.com and click on the link First Union Second Quarter Earnings Audio Webcast. In order to listen to the webcast, you will need to download Real Player Basic 8. Teleconference Instructions: The telephone number for the conference call is 888-606-7037 for U.S. callers or 415-228-4891 for international callers. You will be asked to tell the answering coordinator your name and the name of your firm. Mention the conference Access Code: 33345. Replay: Thursday, July 12, from noon until 5 p.m. EDT on Monday, July 23. Replay telephone number is 402-220-3026. -- more -- FIRST UNION REPORTS 2ND QUARTER EARNINGS/Page 6 This news release and the conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements about the benefits of the merger between First Union Corporation and Wachovia Corporation, including future financial and operating results, cost savings, enhanced revenues, and accretion to reported earnings that may be realized from the merger; (ii) statements with respect to First Union's plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets", "projects" and similar expressions. These statements are based upon the current beliefs and expectations of First Union's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the risk that the businesses of First Union and Wachovia will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the merger on the proposed terms and schedule; (6) the failure of First Union's and Wachovia's stockholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength of the local economies in which First Union conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on First Union's loan portfolio and allowance for loan losses; (9) changes in the U.S. and foreign legal and regulatory framework; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on First Union's and the combined company's investment banking and asset management activities. Additional factors that could cause First Union's results to differ materially from those described in the forward-looking statements can be found in First Union's reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction with Wachovia or other matters attributable to First Union or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. First Union does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made. Additional Information The proposed merger between First Union and Wachovia will be submitted to First Union's and Wachovia's stockholders for their consideration. Stockholders are urged to read the definitive joint proxy statement/prospectus regarding the proposed transaction and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain (or will contain) important information. You will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about First Union and Wachovia, at the SEC's Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC filings that have been or will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to First Union, Investor Relations, One First Union Center, Charlotte, North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations, 100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397). -- more --
PAGE 7 FIRST UNION CORPORATION FINANCIAL HIGHLIGHTS (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ 2001 2000 ---------------------------- ------------------------------------- (Dollars in millions, except Second First Fourth Third Second per share data) Quarter Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL HIGHLIGHTS Operating Earnings Net interest income - tax-equivalent $ 1,742 1,734 1,757 1,860 1,930 Fee and other income 1,629 1,546 1,582 1,645 1,746 - ------------------------------------------------------------------------------------------------------------------------------------ Total revenue - tax-equivalent 3,371 3,280 3,339 3,505 3,676 Provision for loan losses 223 219 192 142 228 Noninterest expense 2,169 2,138 2,132 2,328 2,366 Income taxes - tax-equivalent 330 313 334 333 368 - ------------------------------------------------------------------------------------------------------------------------------------ Income before restructuring, merger- related and other charges and cumulative effect of a change in accounting principle (Operating earnings) 649 610 681 702 714 After-tax restructuring, merger-related and other charges (16) (26) (36) 150 (2,913) - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) before cumulative effect of a change in accounting principle 633 584 645 852 (2,199) Cumulative effect of a change in the accounting for beneficial interests, net of tax - - (46) - - - ------------------------------------------------------------------------------------------------------------------------------------ Net income (loss) (As reported) $ 633 584 599 852 (2,199) ==================================================================================================================================== DILUTED EARNINGS PER SHARE Income before restructuring, merger- related and other charges and cumulative effect of a change in accounting principle $ 0.66 0.62 0.69 0.71 0.73 Income (loss) before cumulative effect of a change in accounting principle 0.64 0.59 0.65 0.86 (2.27) Net income (loss) $ 0.64 0.59 0.60 0.86 (2.27) ==================================================================================================================================== PROFITABILITY (Operating earnings) Return on average stockholders' equity 16.19 % 15.64 15.36 15.76 17.74 Net interest margin 3.41 3.42 3.46 3.52 3.51 Fee and other income as % of total revenue 48.32 47.13 47.38 46.93 47.50 Overhead efficiency ratio 64.34 65.18 63.85 66.42 64.36 Effective income tax rate 31.54 % 31.54 31.21 30.43 32.45 ==================================================================================================================================== CASH OPERATING EARNINGS Net income $ 723 684 753 778 807 Diluted earnings per share $ 0.73 0.69 0.76 0.79 0.82 Return on average tangible stockholders' equity 23.35 % 22.91 21.55 22.15 30.18 Return on average stockholders' equity 18.04 17.52 17.00 17.47 20.04 Overhead efficiency ratio 62.06 % 62.80 61.46 64.17 61.64 Operating leverage $ 59 (67) 31 (154) (136) ====================================================================================================================================
PAGE 8 FIRST UNION CORPORATION OTHER FINANCIAL DATA (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ 2001 2000 ---------------------------- ------------------------------------- (Dollars in millions, except Second First Fourth Third Second per share data) Quarter Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL ADEQUACY (a) Tier I capital ratio 7.40 % 7.18 7.02 7.00 6.65 Total capital ratio 11.48 11.33 11.19 11.32 10.57 Leverage ratio 6.01 % 5.88 5.92 5.73 5.34 ==================================================================================================================================== ASSET QUALITY Allowance as % of loans, net 1.44 % 1.43 1.39 1.39 1.33 Allowance as % of nonperforming assets 133 132 135 181 193 Net charge-offs as % of average loans, net 0.52 0.53 0.64 0.46 0.69 Nonperforming assets to loans, net, foreclosed properties and assets held for sale 1.23 % 1.30 1.22 0.98 0.87 ==================================================================================================================================== OTHER DATA Employees 67,420 69,362 70,639 70,533 72,890 Branches 2,162 2,164 2,193 2,253 2,258 ATMs 3,419 3,676 3,772 3,831 3,832 Shares outstanding (In thousands) 979,205 981,268 979,963 986,004 986,394 Common stock price $ 34.94 33.00 27.81 32.19 25.00 Book value per common share $ 16.49 16.39 15.66 15.00 14.14 Common stock price to book value 212 % 201 178 215 177 Market capitalization $ 34,213 32,382 27,253 31,739 24,660 Dividends paid per common share $ 0.24 0.24 0.48 0.48 0.48 ==================================================================================================================================== AVERAGE BALANCE SHEET DATA Commercial loans, net $ 76,378 77,270 76,253 75,380 75,951 Consumer loans, net 42,834 42,580 43,840 48,095 56,663 Loans, net 119,212 119,850 120,093 123,475 132,614 Earning assets 204,673 203,720 202,606 211,089 220,061 Total assets 247,254 245,469 239,375 246,818 255,583 Core deposits 119,035 118,192 118,944 118,074 118,256 Total deposits 136,979 137,282 138,329 143,112 141,204 Interest-bearing liabilities 185,224 183,995 181,832 190,146 196,954 Stockholders' equity $ 16,026 15,846 14,753 14,236 16,614 ==================================================================================================================================== PERIOD END BALANCE SHEET DATA Commercial loans, net $ 79,529 80,470 80,240 79,361 78,615 Consumer loans, net 42,963 42,383 43,520 44,058 49,744 Loans, net 122,492 122,853 123,760 123,419 128,359 Goodwill and other intangible assets Goodwill 3,476 3,524 3,481 3,551 3,510 Deposit base premium 140 157 174 195 215 Other 9 9 9 10 11 Total assets 245,941 252,949 254,170 246,640 257,994 Core deposits 121,022 120,786 122,383 118,317 119,352 Total deposits 138,567 140,795 142,668 138,870 144,864 Stockholders' equity $ 16,144 16,081 15,347 14,795 13,951 ==================================================================================================================================== (a) The second quarter of 2001 is based on estimates.
PAGE 9 FIRST UNION CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) - ----------------------------------------------------------------------------------------------------------------------------------- Three Months Ended June 30, 2001 Six Months Ended June 30, 2001 -------------------------------------------------------------------------------- Restructuring Restructuring and Other and Other Operating Charges/ As Operating Charges/ As (In millions, except per share data) Earnings Gains Reported Earnings Gains Reported - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income $ 1,711 - 1,711 3,413 - 3,413 Provision for loan losses 223 - 223 442 - 442 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 1,488 - 1,488 2,971 - 2,971 - ----------------------------------------------------------------------------------------------------------------------------------- Fee and other income Service charges and fees 486 - 486 954 - 954 Advisory, underwriting and other investment banking fees 238 - 238 436 - 436 Other income Security transactions - portfolio - - - (16) - (16) Asset sales and securitization 64 (8) 56 76 (52) 24 Gain on sale of branches - - - - 73 73 Other income 841 9 850 1,725 8 1,733 - ----------------------------------------------------------------------------------------------------------------------------------- Total fee and other income 1,629 1 1,630 3,175 29 3,204 - ----------------------------------------------------------------------------------------------------------------------------------- Noninterest expense Restructuring charges - (69) (69) - (67) (67) Other noninterest expense 2,169 97 2,266 4,307 166 4,473 - ----------------------------------------------------------------------------------------------------------------------------------- Total noninterest expense 2,169 28 2,197 4,307 99 4,406 - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes (benefits) 948 (27) 921 1,839 (70) 1,769 Income taxes (benefits) 299 (11) 288 580 (28) 552 - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 649 (16) 633 1,259 (42) 1,217 =================================================================================================================================== Diluted earnings per share $ 0.66 (0.02) 0.64 1.28 (0.05) 1.23 ===================================================================================================================================
PAGE 10 FIRST UNION CORPORATION CONSOLIDATED STATEMENTS OF OPERATING EARNINGS (a) (Unaudited) - ----------------------------------------------------------------------------------------------------------------------------------- 2001 2000 ---------------------------- ------------------------------------- Second First Fourth Third Second (In millions, except per share data) Quarter Quarter Quarter Quarter Quarter - ----------------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $ 2,420 2,526 2,701 2,768 2,929 Interest and dividends on securities 881 925 939 975 1,023 Trading account interest 198 204 199 212 218 Other interest income 321 370 425 510 322 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest income 3,820 4,025 4,264 4,465 4,492 - ----------------------------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE Interest on deposits 1,192 1,253 1,367 1,422 1,285 Interest on short-term borrowings 454 493 538 609 750 Interest on long-term debt 463 577 627 600 552 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest expense 2,109 2,323 2,532 2,631 2,587 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income 1,711 1,702 1,732 1,834 1,905 Provision for loan losses 223 219 192 142 228 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 1,488 1,483 1,540 1,692 1,677 - ----------------------------------------------------------------------------------------------------------------------------------- FEE AND OTHER INCOME Service charges and fees 486 468 481 508 491 Commissions 389 375 383 365 375 Fiduciary and asset management fees 384 381 387 384 374 Advisory, underwriting and other investment banking fees 238 198 187 148 182 Principal investing (58) (43) (43) 34 205 Other income 190 167 187 206 119 - ----------------------------------------------------------------------------------------------------------------------------------- Total fee and other income 1,629 1,546 1,582 1,645 1,746 - ----------------------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE Salaries and employee benefits 1,363 1,329 1,243 1,381 1,396 Occupancy 155 163 150 157 155 Equipment 198 205 221 213 210 Advertising 11 9 16 14 31 Communications and supplies 111 110 123 117 122 Professional and consulting fees 69 73 97 87 82 Goodwill and other intangible amortization 77 78 80 79 100 Sundry expense 185 171 202 280 270 - ----------------------------------------------------------------------------------------------------------------------------------- Total noninterest expense 2,169 2,138 2,132 2,328 2,366 - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 948 891 990 1,009 1,057 Income taxes 299 281 309 307 343 - ----------------------------------------------------------------------------------------------------------------------------------- Net operating earnings $ 649 610 681 702 714 =================================================================================================================================== Diluted earnings per share $ 0.66 0.62 0.69 0.71 0.73 =================================================================================================================================== (a) Operating earnings exclude restructuring, merger-related and other changes and gains and cumulative effect of a change in accounting principle.
PAGE 11 FIRST UNION CORPORATION CONSOLIDATED STATEMENTS OF OPERATING EARNINGS (a) (Unaudited) - -------------------------------------------------------------------------------- Six Months Ended June 30, ------------------- (In millions, except per share data) 2001 2000 - -------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $ 4,946 5,777 Interest and dividends on securities 1,806 1,989 Trading account interest 402 409 Other interest income 691 630 - -------------------------------------------------------------------------------- Total interest income 7,845 8,805 - -------------------------------------------------------------------------------- INTEREST EXPENSE Interest on deposits 2,445 2,480 Interest on short-term borrowings 947 1,389 Interest on long-term debt 1,040 1,065 - -------------------------------------------------------------------------------- Total interest expense 4,432 4,934 - -------------------------------------------------------------------------------- Net interest income 3,413 3,871 Provision for loan losses 442 420 - -------------------------------------------------------------------------------- Net interest income after provision for loan losses 2,971 3,451 - -------------------------------------------------------------------------------- FEE AND OTHER INCOME Service charges and fees 954 977 Commissions 764 843 Fiduciary and asset management fees 765 740 Advisory, underwriting and other investment banking fees 436 391 Principal investing (101) 404 Other income 357 233 - -------------------------------------------------------------------------------- Total fee and other income 3,175 3,588 - -------------------------------------------------------------------------------- NONINTEREST EXPENSE Salaries and employee benefits 2,692 2,825 Occupancy 318 312 Equipment 403 424 Advertising 20 61 Communications and supplies 221 247 Professional and consulting fees 142 153 Goodwill and other intangible amortization 155 202 Sundry expense 356 529 - -------------------------------------------------------------------------------- Total noninterest expense 4,307 4,753 - -------------------------------------------------------------------------------- Income before income taxes 1,839 2,286 Income taxes 580 734 - -------------------------------------------------------------------------------- Net operating earnings $ 1,259 1,552 ================================================================================ Diluted earnings per share $ 1.28 1.58 ================================================================================ (a) Operating earnings exclude restructuring, merger-related and other changes and gains.
PAGE 12 FIRST UNION CORPORATION CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) - ----------------------------------------------------------------------------------------------------------------------------------- 2001 2000 ---------------------------- ------------------------------------- Second First Fourth Third Second (In millions, except per share data) Quarter Quarter Quarter Quarter Quarter - ----------------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $ 2,420 2,526 2,701 2,768 2,929 Interest and dividends on securities 881 925 939 975 1,023 Trading account interest 198 204 199 212 218 Other interest income 321 370 425 510 322 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest income 3,820 4,025 4,264 4,465 4,492 - ----------------------------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE Interest on deposits 1,192 1,253 1,367 1,422 1,285 Interest on short-term borrowings 454 493 538 609 750 Interest on long-term debt 463 577 627 600 552 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest expense 2,109 2,323 2,532 2,631 2,587 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income 1,711 1,702 1,732 1,834 1,905 Provision for loan losses 223 219 192 322 1,030 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 1,488 1,483 1,540 1,512 875 - ----------------------------------------------------------------------------------------------------------------------------------- FEE AND OTHER INCOME Service charges and fees 486 468 481 506 447 Commissions 389 375 383 365 375 Fiduciary and asset management fees 384 381 387 384 374 Advisory, underwriting and other investment banking fees 238 198 182 145 182 Principal investing (58) (43) (43) 34 205 Other income 191 195 363 749 (649) - ----------------------------------------------------------------------------------------------------------------------------------- Total fee and other income 1,630 1,574 1,753 2,183 934 - ----------------------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE Salaries and employee benefits 1,400 1,373 1,407 1,427 1,396 Occupancy 180 164 150 160 155 Equipment 207 211 233 213 210 Advertising 16 14 35 18 31 Communications and supplies 111 110 130 125 123 Professional and consulting fees 84 83 104 91 82 Goodwill and other intangible amortization 77 78 80 79 100 Restructuring and merger-related charges (69) 2 33 52 2,110 Sundry expense 191 174 205 283 296 - ----------------------------------------------------------------------------------------------------------------------------------- Total noninterest expense 2,197 2,209 2,377 2,448 4,503 - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes (benefits) and cumulative effect of a change in accounting principle 921 848 916 1,247 (2,694) Income taxes (benefits) 288 264 271 395 (495) - ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) before cumulative effect of a change in accounting principle 633 584 645 852 (2,199) Cumulative effect of a change in the accounting for beneficial interests, net of tax - - (46) - - - ----------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 633 584 599 852 (2,199) =================================================================================================================================== PER SHARE DATA Basic Income (loss) before change in accounting principle $ 0.65 0.60 0.66 0.87 (2.27) Net income (loss) 0.65 0.60 0.61 0.87 (2.27) Diluted Income (loss) before change in accounting principle 0.64 0.59 0.65 0.86 (2.27) Net income (loss) 0.64 0.59 0.60 0.86 (2.27) Cash Dividends $ 0.24 0.24 0.48 0.48 0.48 AVERAGE SHARES (In thousands) Basic 969,333 967,671 969,097 971,453 969,707 Diluted 978,185 975,847 990,445 986,763 981,940 ===================================================================================================================================
PAGE 13 FIRST UNION CORPORATION CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) - -------------------------------------------------------------------------------- Six Months Ended June 30, ---------------------- (In millions, except per share data) 2001 2000 - -------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $ 4,946 5,777 Interest and dividends on securities 1,806 1,989 Trading account interest 402 409 Other interest income 691 630 - -------------------------------------------------------------------------------- Total interest income 7,845 8,805 - -------------------------------------------------------------------------------- INTEREST EXPENSE Interest on deposits 2,445 2,480 Interest on short-term borrowings 947 1,389 Interest on long-term debt 1,040 1,065 - -------------------------------------------------------------------------------- Total interest expense 4,432 4,934 - -------------------------------------------------------------------------------- Net interest income 3,413 3,871 Provision for loan losses 442 1,222 - -------------------------------------------------------------------------------- Net interest income after provision for loan losses 2,971 2,649 - -------------------------------------------------------------------------------- FEE AND OTHER INCOME Service charges and fees 954 933 Commissions 764 843 Fiduciary and asset management fees 765 740 Advisory, underwriting and other investment banking fees 436 391 Principal investing (101) 404 Other income 386 (535) - -------------------------------------------------------------------------------- Total fee and other income 3,204 2,776 - -------------------------------------------------------------------------------- NONINTEREST EXPENSE Salaries and employee benefits 2,773 2,825 Occupancy 344 312 Equipment 418 424 Advertising 30 61 Communications and supplies 221 248 Professional and consulting fees 167 153 Goodwill and other intangible amortization 155 202 Restructuring and merger-related charges (67) 2,105 Sundry expense 365 555 - -------------------------------------------------------------------------------- Total noninterest expense 4,406 6,885 - -------------------------------------------------------------------------------- Income (loss) before income taxes (benefits) 1,769 (1,460) Income taxes (benefits) 552 (101) - -------------------------------------------------------------------------------- Net income (loss) $ 1,217 (1,359) ================================================================================ PER SHARE DATA Basic earnings $ 1.24 (1.41) Diluted earnings 1.23 (1.41) Cash dividends $ 0.48 0.96 AVERAGE SHARES (In thousands) Basic 968,502 970,940 Diluted 976,978 983,147 ================================================================================
PAGE 14 FIRST UNION CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ 2001 2000 ---------------------------- ------------------------------------- Second First Fourth Third Second (In millions, except per share data) Quarter Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Cash and due from banks $ 8,665 7,857 9,906 7,063 8,028 Interest-bearing bank balances 1,666 2,971 3,239 4,585 1,913 Federal funds sold and securities purchased under resale agreements (carrying amount of collateral $2,255 at June 30,2001, $819 repledged) 9,161 11,866 11,240 5,395 9,054 - ------------------------------------------------------------------------------------------------------------------------------------ Total cash and cash equivalents 19,492 22,694 24,385 17,043 18,995 - ------------------------------------------------------------------------------------------------------------------------------------ Trading account assets 23,181 20,431 21,630 17,417 18,237 Securities (carrying amount of collateral $21,674 at June 30,2001) 48,055 51,528 49,246 52,065 55,203 Loans, net of unearned income 122,492 122,853 123,760 123,419 128,359 Allowance for loan losses (1,760) (1,759) (1,722) (1,720) (1,706) - ------------------------------------------------------------------------------------------------------------------------------------ Loans, net 120,732 121,094 122,038 121,699 126,653 - ------------------------------------------------------------------------------------------------------------------------------------ Premises and equipment 4,852 4,968 5,024 5,090 5,211 Due from customers on acceptances 856 894 874 968 839 Goodwill and other intangible assets 3,625 3,690 3,664 3,756 3,736 Other assets 25,148 27,650 27,309 28,602 29,120 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets $ 245,941 252,949 254,170 246,640 257,994 ==================================================================================================================================== IABILITIES AND STOCKHOLDERS' EQUITY Deposits Noninterest-bearing deposits 29,633 28,582 30,315 28,501 30,229 Interest-bearing deposits 108,934 112,213 112,353 110,369 114,635 - ------------------------------------------------------------------------------------------------------------------------------------ Total deposits 138,567 140,795 142,668 138,870 144,864 Short-term borrowings 34,754 39,719 39,446 39,388 50,883 Bank acceptances outstanding 859 902 880 976 847 Trading account liabilities 7,907 8,130 7,475 5,138 4,541 Other liabilities 11,650 11,230 12,545 11,215 9,768 Long-term debt 36,060 36,092 35,809 36,258 33,140 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 229,797 236,868 238,823 231,845 244,043 - ------------------------------------------------------------------------------------------------------------------------------------ STOCKHOLDERS' EQUITY Preferred stock - - - - - Common stock, $3.33-1/3 par value; authorized 2 billion shares 3,264 3,271 3,267 3,287 3,288 Paid-in capital 6,345 6,307 6,272 6,211 6,066 Retained earnings 6,627 6,281 6,021 6,135 5,783 Accumulated other comprehensive income, net (92) 222 (213) (838) (1,186) - ------------------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 16,144 16,081 15,347 14,795 13,951 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $ 245,941 252,949 254,170 246,640 257,994 ====================================================================================================================================
PAGE 15 FIRST UNION CORPORATION NET INTEREST INCOME SUMMARIES (Unaudited) - --------------------------------------------------------------------------------------------------------------------------------- SECOND QUARTER 2001 FIRST QUARTER 2001 ------------------------------------------------------------------------- Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ (In millions) Balances Expense Paid Balances Expense Paid - --------------------------------------------------------------------------------------------------------------------------------- ASSETS Interest-bearing bank balances $ 2,529 29 4.57 % $ 1,826 25 5.69 % Federal funds sold and securities purchased under resale agreements 8,923 99 4.41 7,036 95 5.49 Trading account assets 13,965 202 5.78 13,315 206 6.24 Securities 49,931 899 7.21 50,417 945 7.50 Loans Commercial Commercial, financial and agricultural 53,160 1,098 8.29 53,416 1,130 8.56 Real estate - construction and other 3,193 52 6.56 3,231 62 7.76 Real estate - mortgage 8,525 149 7.01 9,195 180 7.95 Lease financing 6,075 157 10.29 6,084 161 10.62 Foreign 5,425 83 6.12 5,344 92 7.01 - ------------------------------------------------------------------------------- ---------------------- Total commercial 76,378 1,539 8.08 77,270 1,625 8.51 - ------------------------------------------------------------------------------- ---------------------- Consumer Real estate - mortgage 17,435 318 7.29 17,610 331 7.52 Installment loans and vehicle leasing 25,399 572 9.02 24,970 580 9.41 - ------------------------------------------------------------------------------- ---------------------- Total consumer 42,834 890 8.32 42,580 911 8.63 - ------------------------------------------------------------------------------- ---------------------- Total loans 119,212 2,429 8.17 119,850 2,536 8.55 - ------------------------------------------------------------------------------- ---------------------- Other earning assets 10,113 193 7.68 11,276 250 8.96 - ------------------------------------------------------------------------------- ---------------------- Total earning assets 204,673 3,851 7.54 203,720 4,057 8.03 ====================== ==================== Cash and due from banks 7,568 7,749 Other assets 35,013 34,000 - -------------------------------------------------------------------- ----------- Total assets $ 247,254 $ 245,469 ==================================================================== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing deposits Savings and NOW accounts 39,640 267 2.70 38,756 264 2.76 Money market accounts 18,746 225 4.81 17,941 200 4.52 Other consumer time 33,268 477 5.76 34,452 506 5.96 Foreign 6,357 73 4.62 6,851 94 5.59 Other time 11,587 150 5.20 12,239 189 6.27 - ------------------------------------------------------------------------------- ---------------------- Total interest-bearing deposits 109,598 1,192 4.36 110,239 1,253 4.61 Federal funds purchased and securities sold under repurchase agreements 27,128 356 5.27 25,005 378 6.13 Commercial paper 2,435 25 4.08 2,540 33 5.32 Other short-term borrowings 9,809 73 2.98 9,580 82 3.46 Long-term debt 36,254 463 5.11 36,631 577 6.30 - ------------------------------------------------------------------------------- ---------------------- Total interest-bearing liabilities 185,224 2,109 4.57 183,995 2,323 5.10 ====================== ==================== Noninterest-bearing deposits 27,381 27,043 Other liabilities 18,623 18,585 Stockholders' equity 16,026 15,846 - -------------------------------------------------------------------- ----------- Total liabilities and stockholders' equity $ 247,254 $ 245,469 ==================================================================== =========== Interest income and rate earned $ 3,851 7.54 % $ 4,057 8.03 % Interest expense and equivalent rate paid 2,109 4.13 2,323 4.61 - ------------------------------------------------------------------------------------------- ---------------------- Net interest income and margin (a) $ 1,742 3.41 % $ 1,734 3.42 % =========================================================================================== ====================== (a) The net margin includes (in basis points): 13, 14, 15, 22, and 27 for the quarters ended June 30, 2001, March 31, 2001, December 31, 2000, September 30, 2000, and June 30, 2000, respectively, related to net interest income from hedge-related derivative transactions.
PAGE 16 FIRST UNION CORPORATION NET INTEREST INCOME SUMMARIES (Unaudited) - --------------------------------------------------------------------------------------------------------------------------- FOURTH QUARTER 2000 THIRD QUARTER 2000 SECOND QUARTER 2000 ------------------------------------------------------------------------------------------------------------------------ Average Average Average Interest Rates Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Average Income/ Earned/ Balances Expense Paid Balances Expense Paid Balances Expense Paid ------------------------------------------------------------------------------------------------------------------------ $ 1,266 14 4.34 % $ 1,465 20 5.28 % $ 977 13 5.52 % 5,994 89 5.86 6,367 97 6.11 9,318 132 5.72 11,569 201 6.95 12,204 214 6.99 12,950 220 6.83 50,554 952 7.54 52,780 988 7.48 56,027 1,035 7.40 53,554 1,233 9.17 53,226 1,250 9.34 54,486 1,251 9.22 3,011 65 8.69 2,676 59 8.65 2,458 52 8.49 9,130 198 8.63 9,294 203 8.70 9,302 195 8.44 5,272 150 11.37 5,168 148 11.45 5,123 153 11.90 5,286 97 7.29 5,016 91 7.17 4,582 80 7.08 ------------------------ ------------------------ ------------------------ 76,253 1,743 9.11 75,380 1,751 9.24 75,951 1,731 9.15 ------------------------ ------------------------ ------------------------ 18,805 362 7.70 23,163 432 7.47 25,760 469 7.28 25,035 606 9.63 24,932 596 9.51 30,903 740 9.61 ------------------------ ------------------------ ------------------------ 43,840 968 8.80 48,095 1,028 8.53 56,663 1,209 8.55 ------------------------ ------------------------ ------------------------ 120,093 2,711 8.99 123,475 2,779 8.96 132,614 2,940 8.90 ------------------------ ------------------------ ------------------------ 13,130 322 9.76 14,798 393 10.63 8,175 177 8.66 ------------------------ ------------------------ ------------------------ 202,606 4,289 8.44 211,089 4,491 8.48 220,061 4,517 8.24 ====================== ====================== ======================= 7,653 7,446 7,830 29,116 28,283 27,692 ------------ ------------ ----------- $ 239,375 $ 246,818 $ 255,583 ============ ============ =========== 37,640 301 3.17 37,680 296 3.13 38,940 283 2.92 17,008 202 4.74 15,629 175 4.46 14,959 154 4.13 36,421 541 5.91 36,328 524 5.74 35,386 478 5.43 7,483 110 5.85 9,721 151 6.18 8,795 130 5.92 11,902 213 7.13 15,317 276 7.16 14,153 240 6.82 ------------------------ ------------------------ ------------------------ 110,454 1,367 4.92 114,675 1,422 4.93 112,233 1,285 4.60 23,686 400 6.72 28,363 459 6.43 36,762 552 6.04 2,639 42 6.19 2,588 40 6.25 3,308 49 6.03 9,345 96 4.09 9,257 110 4.74 11,096 149 5.37 35,708 627 7.03 35,263 600 6.80 33,555 552 6.58 ------------------------ ------------------------ ------------------------ 181,832 2,532 5.55 190,146 2,631 5.51 196,954 2,587 5.28 ====================== ====================== ======================= 27,875 28,437 28,971 14,915 13,999 13,044 14,753 14,236 16,614 ------------ ------------ ----------- $ 239,375 $ 246,818 $ 255,583 ============ ============ =========== $ 4,289 8.44 % $ 4,491 8.48 % $ 4,517 8.24 % 2,532 4.98 2,631 4.96 2,587 4.73 ---------------------- ---------------------- ----------------------- $ 1,757 3.46 % $ 1,860 3.52 % $ 1,930 3.51 % ====================== ====================== =======================
PAGE 17 FIRST UNION CORPORATION NET INTEREST INCOME SUMMARIES (Unaudited) - ---------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED 2001 SIX MONTHS ENDED 2000 --------------------------------------------------------------------------- Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ (In millions) Balances Expense Paid Balances Expense Paid - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS Interest-bearing bank balances $ 2,179 54 5.04 % $ 822 20 5.07 % Federal funds sold and securities purchased under resale agreements 7,985 194 4.89 9,436 261 5.56 Trading account assets 13,642 408 6.00 12,138 413 6.84 Securities 50,173 1,844 7.35 55,208 2,013 7.29 Loans Commercial Commercial, financial and agricultural 53,286 2,228 8.43 53,647 2,425 9.09 Real estate - construction and other 3,212 114 7.16 2,432 100 8.29 Real estate - mortgage 8,858 329 7.50 9,141 378 8.32 Lease financing 6,080 318 10.46 5,168 313 12.10 Foreign 5,385 175 6.56 4,557 154 6.82 - ------------------------------------------------------------------------------ ------------------------ Total commercial 76,821 3,164 8.30 74,945 3,370 9.04 - ------------------------------------------------------------------------------ ------------------------ Consumer Real estate - mortgage 17,522 649 7.41 26,655 968 7.26 Installment loans and vehicle leasing 25,186 1,152 9.22 30,448 1,459 9.62 - ------------------------------------------------------------------------------ ------------------------ Total consumer 42,708 1,801 8.47 57,103 2,427 8.52 - ------------------------------------------------------------------------------ ------------------------ Total loans 119,529 4,965 8.36 132,048 5,797 8.81 - ------------------------------------------------------------------------------ ------------------------ Other earning assets 10,691 443 8.35 8,256 349 8.47 - ------------------------------------------------------------------------------ ------------------------ Total earning assets 204,199 7,908 7.78 217,908 8,853 8.15 ===================== ===================== Cash and due from banks 7,658 7,954 Other assets 34,510 26,074 - ------------------------------------------------------------------- ----------- Total assets $ 246,367 $ 251,936 =================================================================== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing deposits Savings and NOW accounts 39,200 531 2.73 39,385 572 2.92 Money market accounts 18,346 425 4.67 15,262 305 4.01 Other consumer time 33,857 983 5.86 34,688 901 5.22 Foreign 6,603 167 5.12 8,960 253 5.68 Other time 11,911 339 5.75 13,688 449 6.60 - ------------------------------------------------------------------------------ ------------------------ Total interest-bearing deposits 109,917 2,445 4.49 111,983 2,480 4.45 Federal funds purchased and securities sold under repurchase agreements 26,072 734 5.68 36,024 1,034 5.77 Commercial paper 2,487 58 4.71 3,152 91 5.81 Other short-term borrowings 9,695 155 3.21 10,098 264 5.24 Long-term debt 36,442 1,040 5.71 33,060 1,065 6.44 - ------------------------------------------------------------------------------ ------------------------ Total interest-bearing liabilities 184,613 4,432 4.83 194,317 4,934 5.10 ===================== ===================== Noninterest-bearing deposits 27,213 28,829 Other liabilities 18,604 12,191 Stockholders' equity 15,937 16,599 - ------------------------------------------------------------------- ----------- Total liabilities and stockholders' equity $ 246,367 $ 251,936 =================================================================== =========== Interest income and rate earned $ 7,908 7.78 % $ 8,853 8.15 % Interest expense and equivalent rate paid 4,432 4.36 4,934 4.55 - ------------------------------------------------------------------------------------------ --------------------- Net interest income and margin (a) $ 3,476 3.42 % $ 3,919 3.60 % ========================================================================================== ===================== (a) The net interest margin includes (in basis points): 14 and 27 for the six months ended June 30, 2001, and June 30, 2000, respectively, related to net interest income from hedge-related derivative transactions.
EX-99.B 3 ex99b_75243.txt SUPPLEMENTAL EARNINGS PACKAGE EXHIBIT 99(b) [FIRST UNION LOGO APPEARS HERE] - -------------------------------------------------------------------------------- [FIRST UNION LOGO APPEARS HERE] SECOND QUARTER 2001 SUPPLEMENTAL EARNINGS PACKAGE (ALL COMPARISONS ARE WITH FIRST QUARTER 2001 UNLESS OTHERWISE NOTED) TABLE OF CONTENTS Highlights of the Quarter.........................................2 Performance Review................................................3 Earnings Summary..................................................4 Net Interest Income...............................................4 Fee and Other Income..............................................6 Noninterest Expense...............................................7 Asset Quality.....................................................8 Loans Held For Sale..............................................10 Business Segment Results.........................................12 Key Definitions..................................................13 General Bank.....................................................14 Capital Management...............................................19 Corporate and Investment Banking.................................23 Parent...........................................................28 ALL INFORMATION EXCLUDES RESTRUCTURING AND OTHER CHARGES/GAINS AND IS BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE EXCEPT WHERE SPECIFICALLY NOTED. - -------------------------------------------------------------------------------- Page 1 [FIRST UNION LOGO APPEARS HERE] - -------------------------------------------------------------------------------- HIGHLIGHTS OF THE QUARTER - ------------------------- Earnings o Operating EPS of $0.66 per share ($0.73 on a cash operating basis), up 6% from $0.62 in 1Q01. Operating earnings of $649 million, up 6% from $610 million in 1Q01. o Reported net income for 2Q01 was $633 million, or $0.64 per share. This included a net charge of $0.02 in restructuring and other charges/gains primarily related to the June 2000 strategic repositioning. Reported net income in 1Q01 was $0.59 per share, which included a net charge of $0.03 in restructuring and other charges/gains. o Revenue growth was 3%, while expenses remained relatively flat. Revenue growth exceeded expense growth, producing operating leverage of $60 million for the quarter. o Average diluted shares increased 2.3 million, primarily due to the vesting of stock awards issued in previous years. We repurchased 2.1 million shares in the open market during the quarter. Shares subject to forward contracts increased by 5.9 million shares (no effect on outstanding shares). Core Businesses o General Bank revenues up 6% vs. 1Q01; up 4% excluding strong mortgage banking results. General Bank deposits and loans continued to show solid growth while investment sales were also up, driven by record bank annuity sales of $717 million. Service charges and fees grew 7%. o Capital Management revenues increased despite continued weak market conditions, due to strong annuity sales, higher broker client assets, and record mutual fund assets. o Corporate and Investment Banking revenues up 7% on strength in agency businesses. Compared to 2Q00, revenues are up 21% excluding principal investing while expenses have declined. Seeing increased market share in key investment banking businesses. Capital o Continued focus on strengthening capital ratios: o Tier 1 capital ratio improved to 7.40% from 7.18%, the fourth straight quarterly increase. o Total capital ratio improved to 11.48% from 11.33%; leverage ratio improved to 6.01% from 5.88%. Credit o Credit quality remained relatively stable and we continue to proactively manage the portfolio. o Net charge-offs were 0.52% vs. 0.53% in 1Q01. Provided $30 million in excess of net charge-offs and provisions for loans sold or transferred to assets held for sale. o Total nonperforming assets declined 6%. Allowance as a percentage of loans and nonperforming assets increased modestly from 1Q01. June 2000 Strategic Repositioning o Completed on schedule and on budget. 2001 Outlook o Revised charge-off guidance for full year 2001 from 60-80 bps to 55-65 bps. o Core earnings of 66 cents provides foundation for continued growth. o Continued to build capital ratios; settle $500 million in equity forwards during 4Q01. o Continue to proactively manage the portfolio with goal to hold NPAs relatively flat while maintaining current allowance coverage ratios. - -------------------------------------------------------------------------------- Page 2 [First Union logo appears here] - -------------------------------------------------------------------------------- PERFORMANCE REVIEW - ------------------ Before Restructuring and Other Charges/Gains
- ---------------------------------------------------------------------------------------------------------------------------------- Operating Basis Performance Highlights 2001 2000 2 Q 01 --------------------- --------------------------------- Second First Fourth Third Second vs (In millions, except per share data) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ---------------------------------------------------------------------------------------------------------------------------------- Operating earnings (a) Net income $ 649 610 681 702 714 6 % Diluted earnings per share $ 0.66 0.62 0.69 0.71 0.73 6 Return on average assets 1.05 % 1.01 1.12 1.12 1.13 - Return on average stockholders' equity 16.19 15.64 15.36 15.76 17.74 - Overhead efficiency ratio 64.34 % 65.18 63.85 66.42 64.36 - Operating leverage $ 60 (65) 30 (133) (134) - % - ---------------------------------------------------------------------------------------------------------------------------------- Cash operating earnings Net income $ 723 684 753 778 807 6 % Diluted earnings per share $ 0.73 0.69 0.76 0.79 0.82 6 Return on average tangible assets 1.19 % 1.15 1.26 1.26 1.30 - Return on average tangible stockholders' equity 23.35 22.91 21.55 22.15 30.18 - Overhead efficiency ratio 62.06 % 62.80 61.46 64.17 61.64 - Operating leverage $ 59 (67) 31 (154) (136) - % - ---------------------------------------------------------------------------------------------------------------------------------- Other financial data Net interest margin 3.41 % 3.42 3.46 3.52 3.51 - Fee and other income as % of total revenue 48.32 47.13 47.38 46.93 47.50 - Effective income tax rate 31.54 % 31.54 31.21 30.43 32.45 - Period-end common stock price $ 34.94 33.00 27.81 32.19 25.00 6 % - ---------------------------------------------------------------------------------------------------------------------------------- Asset quality Net charge-offs as % of average loans, net 0.52 % 0.53 0.64 0.46 0.69 - Nonperforming assets to loans, net, foreclosed properties and assets held for sale 1.23 % 1.30 1.22 0.98 0.87 - - ---------------------------------------------------------------------------------------------------------------------------------- Capital adequacy Tier 1 capital ratio (b) 7.40 % 7.18 7.02 7.00 6.65 - Total capital ratio (b) 11.48 11.33 11.19 11.32 10.57 - Leverage ratio (b) 6.01 % 5.88 5.92 5.73 5.34 - - ---------------------------------------------------------------------------------------------------------------------------------- Other Average diluted shares (In thousands) 978,185 975,847 990,445 986,763 981,940 - % Actual shares (In thousands) 979,205 981,268 979,963 986,004 986,394 - Dividends paid per common share $ 0.24 0.24 0.48 0.48 0.48 - Dividend payout ratio 36.36 % 38.71 69.57 67.42 65.75 - Book value per share $ 16.49 16.39 15.66 15.00 14.14 1 FTE employees 67,420 69,362 70,639 70,533 72,890 (3) % - ---------------------------------------------------------------------------------------------------------------------------------- (a) Operating earnings are reported net income excluding after-tax net restructuring, merger-related and other changes and gains. (b) The second quarter of 2001 is based on estimates. - ----------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Page 3 [First Union logo appears here] - -------------------------------------------------------------------------------- EARNINGS SUMMARY - ---------------- Before Restructuring and Other Charges/Gains
- ---------------------------------------------------------------------------------- ---------------------------------------------- Operating Earnings Summary 2001 2000 2 Q 01 ---------------------- ------------------------------- Second First Fourth Third Second vs (In millions, except per share data) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------------------ Net interest income (Tax-equivalent) $ 1,742 1,734 1,757 1,860 1,930 - % Fee and other income 1,629 1,546 1,582 1,645 1,746 5 - ------------------------------------------------------------------------------------------------------------------------------------ Total revenue (Tax-equivalent) 3,371 3,280 3,339 3,505 3,676 3 Provision for loan losses 223 219 192 142 228 2 Noninterest expense 2,169 2,138 2,132 2,328 2,366 1 - ------------------------------------------------------------------------------------------------------------------------------------ Income before income taxes (Tax-equivalent) 979 923 1,015 1,035 1,082 6 Income taxes 299 281 309 307 343 6 Tax-equivalent adjustment 31 32 25 26 25 (3) - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 649 610 681 702 714 6 % Net income (Cash basis) $ 723 684 753 778 807 6 % - ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per share $ 0.66 0.62 0.69 0.71 0.73 6 % Diluted earnings per share (Cash basis) $ 0.73 0.69 0.76 0.79 0.82 6 % Return on average stockholders' equity 16.19 % 15.64 15.36 15.76 17.74 - Return on average tangible stockholders' equity (Cash basis) 23.35 % 22.91 21.55 22.15 30.18 - - ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME - -------------------
- ----------------------------------------------------------------------------------------------------------------------------------- Interest Income Summary 2001 2000 2 Q 01 ------------------------ ---------------------------------- Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ----------------------------------------------------------------------------------------------------------------------------------- Average earning assets $ 204,673 203,720 202,606 211,089 220,061 - % Average interest-bearing liabilities 185,224 183,995 181,832 190,146 196,954 1 - ----------------------------------------------------------------------------------------------------------------------------------- Interest income (Tax-equivalent) 3,851 4,057 4,289 4,491 4,517 (5) Interest expense 2,109 2,323 2,532 2,631 2,587 (9) - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income (Tax-equivalent) $ 1,742 1,734 1,757 1,860 1,930 - % - ----------------------------------------------------------------------------------------------------------------------------------- Rate earned 7.54 % 8.03 8.44 8.48 8.24 - Equivalent rate paid 4.13 4.61 4.98 4.96 4.73 - - ----------------------------------------------------------------------------------------------------------------------------------- Net interest margin 3.41 % 3.42 3.46 3.52 3.51 - - -----------------------------------------------------------------------------------------------------------------------------------
Key Points o Margin remained relatively flat despite the declining rate environment as higher spreads were offset by the 1Q01 securitization and sale of The Money Store loans and growth in the equity derivatives business Net Interest Income increased modestly, the result of the benefit associated with lower interest rates, as liabilities generally repriced faster than assets. This benefit was largely offset by the impact of the securitization and sale of TMS loans in 1Q01 and growth in low-yielding assets related to our equity derivatives business. Net interest margin decreased 1 bps to 3.41%. Higher spreads related to the rate environment were offset by reduced margin related to the TMS securitization and sale and by growth in equity derivative assets. Excess liquidity (sold as fed funds) also reduced the margin modestly. Derivatives hedging asset and liability positions contributed 13 bps to the margin, down from 14 bps in 1Q01. - -------------------------------------------------------------------------------- Page 4 [First Union logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Average Balance Sheet Data 2001 2000 2 Q 01 ------------------------------- -------------------------------------------- Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------------------ Commercial loans $ 76,378 77,270 76,253 75,380 75,951 (1)% Consumer loans 42,834 42,580 43,840 48,095 56,663 1 - ------------------------------------------------------------------------------------------------------------------------------------ Total loans $119,212 119,850 120,093 123,475 132,614 (1)% - ------------------------------------------------------------------------------------------------------------------------------------ Core interest-bearing deposits $ 91,654 91,149 91,069 89,637 89,285 1 % Noninterest-bearing deposits 27,381 27,043 27,875 28,437 28,971 1 - ------------------------------------------------------------------------------------------------------------------------------------ Total core deposits 119,035 118,192 118,944 118,074 118,256 1 Foreign and other time deposits 17,944 19,090 19,385 25,038 22,948 (6) - ------------------------------------------------------------------------------------------------------------------------------------ Total deposits $136,979 137,282 138,329 143,112 141,204 - % - ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Solid consumer loan growth of 2% and small business up 5%, excluding divestitures and securitizations o Core deposits up 1%, despite an average impact of $434 million from divestitures; low cast core deposits up $2.6 billion excluding divestitures o Reduced purchased deposits due to core deposit growth and lower cost alternatives Average earning assets increased 0.5%. Average loans declined 0.5%. Average commercial loans were down 1%, and were modestly affected lower commercial real estate balances and by the transfer of loans to held for sale in 1Q01. Average consumer loans increased 1%, and increased 2% excluding the impact of $264 million sold or transferred to assets held for sale in 2Q01 and 1Q01 and $400 million in planned runoff of the indirect auto lending and leasing portfolio. Home equity and other consumer direct lending accounted for the normalized increase. Securities and trading assets were flat. Trading account assets increased 5%, the result of continued growth in the equity derivatives business. Securities declined 1%. Other earning assets increased 7% due to an increase in fed funds sold, reverse repos, and interest-bearing balances. Average interest-bearing liabilities increased 0.5%. Average core deposits increased 1%, despite a divestiture impact on the average of $434 million in 1Q01. Both interest-bearing and noninterest-bearing core deposits increased. Low cost core deposits, which exclude CDs and CAP FDIC balances, increased $2.6 billion or 4% excluding divestitures, due to continued sales and retention efforts. Time deposits declined due to the less-attractive rate environment. Other deposits decreased 6%, as both foreign and other time deposits were reduced due to a shift to lower cost wholesale funding sources. Thus, total deposits were flat. Liquidity improved as growth in cash and cash equivalents of $2.6 million outpaced growth of $2.4 billion in short-term borrowings, despite a decline of $1.1 billion in other deposits. Long-term debt declined 1%. - -------------------------------------------------------------------------------- Page 5 [First Union logo appears here] - -------------------------------------------------------------------------------- FEE AND OTHER INCOME - --------------------
- -------------------------------------------------------------------------------------------------------------------------------- Fee and Other Income 2001 2000 2 Q 01 ---------------------- ------------------------------------ Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - -------------------------------------------------------------------------------------------------------------------------------- Service charges and fees $ 486 468 481 508 491 4 % Commissions 389 375 383 365 375 4 Fiduciary and asset management fees 384 381 387 384 374 1 Advisory, underwriting and other investment banking fees 238 198 187 148 182 20 Principal investing (58) (43) (43) 34 205 (35) Other income 190 167 187 206 119 14 - -------------------------------------------------------------------------------------------------------------------------------- Total fee and other income $ 1,629 1,546 1,582 1,645 1,746 5 % - --------------------------------------------------------------------------------------------------------------------------------
Key Points o Across-the-board increases in all fee categories except principal investing o Service charges and fees up 4% on strong growth in both the General Bank and Corporate and Investment Banking o Solid asset management and commissions performance in a challenging market o Corporate and Investment Banking fees up on increased activity in agency businesses o Other income up due to mortgage and home equity-related income Fee and other income increased 5% on strength in investment banking agency businesses as well as increases in service charges and fees and commissions. Fees were 48% of total revenue in 2Q01 and 47% in 1Q01. Service charges and fees grew 4%, on 7% growth in core businesses (7% in General Bank and 5% in Corporate and Investment Banking). Parent contribution declined due to branch divestitures. Mild seasonality in 1Q01 had a minimal effect on growth. Commissions increased 4%, despite a continuing weak market environment, primarily due to strong annuity sales volume of $717 million and increased broker client assets. Fiduciary and asset management fees grew 1%, despite a challenging market environment, reflecting a balanced mix of funds. Money market flows were strong, and mutual fund assets reached a record, but the asset mix shifted slightly toward lower-yielding funds. Additionally, average levels of most market indices for the quarter were down from 1Q01. Advisory, underwriting and other investment banking fees increased 20%. The quarter was particularly strong in agency businesses, as M&A, loan syndications, and commercial real estate finance posted higher results. 1Q01 asset securitization results included trading losses of $46 million in connection with certain nonperforming assets. Fixed income results continued strong but were $50 million lower than 1Q01, as that quarter marked a record for trading results. Principal investing losses were $58 million, primarily due to impairments on private equity investments taken during the quarter. Losses were $43 million in 1Q01. - -------------------------------------------------------------------------------- Page 6 [First Union logo appears here] - -------------------------------------------------------------------------------- Other income increased $23 million. 2Q01 mortgage income was $40 million versus $18 million in 1Q01, primarily related to deliveries and flow servicing sales. 2Q01 results also included a $21 million gain on an $800 million securitization and sale of recent PEL production. Commercial leasing income of $48 million was up $3 million. Net securities losses were less than $1 million compared to losses of $16 million in 1Q01 (2Q01 included $26 million of asset securitization impairment losses on certain nonperforming securities). Market valuation adjustments in 2Q01 of $14 million included $7 million related to the mortgage company (offset by gains in hedge positions). 1Q01 market valuation adjustments totaled $30 million. 1Q01 results included a $75 million gain on the exchange of our interest in Star ATM networks. Other income increased $14 million excluding these items. NONINTEREST EXPENSE - -------------------
- ----------------------------------------------------------------------------------------------------------------------------------- Noninterest Expense 2001 2000 2 Q 01 ------------------------- ------------------------------------ Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ----------------------------------------------------------------------------------------------------------------------------------- Salaries and employee benefits $ 1,363 1,329 1,243 1,381 1,396 3 % Occupancy 155 163 150 157 155 (5) Equipment 198 205 221 213 210 (3) Advertising 11 9 16 14 31 22 Communications and supplies 111 110 123 117 122 1 Professional and consulting fees 69 73 97 87 82 (5) Goodwill and other intangible amortization 77 78 80 79 100 (1) Sundry expense 185 171 202 280 270 8 - ----------------------------------------------------------------------------------------------------------------------------------- Total noninterest expense $ 2,169 2,138 2,132 2,328 2,366 1 % - ----------------------------------------------------------------------------------------------------------------------------------- FTE employees 67,420 69,362 70,639 70,533 72,890 (3) % Overhead efficiency ratio (Cash basis) 62.06 % 62.80 61.46 64.17 61.64 - - -----------------------------------------------------------------------------------------------------------------------------------
Key Points o Total expenses remained virtually flat o Personnel expenses up modestly due to impact of lower FTEs offset by incentive payments on increased revenue o Sundry expenses increased due to costs associated with higher loan volume o Remaining categories down $17 million in total Noninterest expense increased 1%. Salaries and employee benefits expenses grew 3%, due to lower FTEs offset by higher incentive payments on increased revenue. Sundry expense increased $14 million, the result of higher loan costs related to higher mortgage, home equity, and student lending volumes. Other expense categories declined $17 million in the aggregate, reflecting tight expense management. Intangible amortization consisted of $60 million in goodwill amortization and $17 million of deposit based intangible (DBI) amortization. - -------------------------------------------------------------------------------- Page 7 [First Union logo appears here] - -------------------------------------------------------------------------------- ASSET QUALITY - -------------
- ------------------------------------------------------------------------------------------------------------------------------------ Asset Quality 2001 2000 2 Q 01 -------------------- --------------------------------- Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------------------ Nonperforming assets Loans $ 1,223 1,231 1,176 854 791 (1) % Other real estate 104 106 103 97 93 (2) Loans in assets held for sale 250 344 334 349 331 (27) - ------------------------------------------------------------------------------------------------------------------------------------ Total nonperforming assets $ 1,577 1,681 1,613 1,300 1,215 (6) % - ------------------------------------------------------------------------------------------------------------------------------------ as % of loans, net 1.08 % 1.09 1.03 0.77 0.69 - - ------------------------------------------------------------------------------------------------------------------------------------ as % of loans, net, including assets held for sale 1.23 % 1.30 1.22 0.98 0.87 - - ------------------------------------------------------------------------------------------------------------------------------------ Allowance for loan losses Balance, beginning of period $ 1,759 1,722 1,720 1,706 1,760 2 % Provision for loan losses 223 219 192 322 1,030 2 Allowance relating to loans transferred to other assets or sold (65) (23) 2 (166) (856) - Loan losses, net (157) (159) (192) (142) (228) 1 - ------------------------------------------------------------------------------------------------------------------------------------ Balance, end of period $ 1,760 1,759 1,722 1,720 1,706 - % - ------------------------------------------------------------------------------------------------------------------------------------ as % of loans, net 1.44 % 1.43 1.39 1.39 1.33 - as % of nonaccrual and restructured loans (a) 144 143 146 202 215 - as % of nonperforming assets (a) 133 % 132 135 181 193 - - ------------------------------------------------------------------------------------------------------------------------------------ Loan losses, net $ 157 159 192 142 228 (1) % Commercial, as % of average commercial loans 0.55 % 0.56 0.80 0.53 0.73 - Consumer, as % of average consumer loans 0.48 0.48 0.36 0.35 0.63 - Total, as % of average loans, net 0.52 % 0.53 0.64 0.46 0.69 - - ------------------------------------------------------------------------------------------------------------------------------------ (a) These ratios do not include nonperforming loans included in other assets as held for sale. Loans 90 days past due were $213 million, $220 million, $183 million, $145 million and $84 million in the second and first quarters of 2001 and in the fourth, third and second quarters of 2000, respectively. - ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Total NPAs declined 6% o Allowance increased to 1.44% of net loans o Provision exceeded charge-offs by $66 million including the provision for loans sold or transferred to held for sale o Delinquencies 90 days past due were $213 million vs. $220 million at March 31 o Net loan losses declined to $157 million or 52 bps Net loan losses decreased $2 million to $157 million, and the charge-off ratio declined to 0.52% from 0.53% in 1Q01. Gross charge-offs were $191 million offset by $34 million in recoveries. Provision for loan losses exceeded net charge-offs by $66 million. This resulted in the allowance remaining fairly stable after accounting for offsets relating to loan sales and transfers of loans to assets held for sale. Allowance for loan losses remained relatively flat at $1.76 billion, or 1.44% of loans versus 1.43% in 1Q01. The allowance to NPLs ratio rose to 144% while the allowance to NPA ratio (excluding NPAs in assets held for sale) also increased slightly to 133%. - -------------------------------------------------------------------------------- Page 8 [First Union logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Nonperforming Assets (a) 2001 2000 2 Q 01 ---------------------- --------------------------------- Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------------------ Balance, beginning of period $ 1,337 1,279 951 884 1,270 5 % - ------------------------------------------------------------------------------------------------------------------------------------ Commercial loan activity (over $5 million) New nonaccrual loans and advances 314 266 487 223 242 18 Charge-offs (49) (69) (112) (27) (93) (29) Transfers (to) from assets held for sale - - 11 (46) (223) - Payments and return to accrual status (50) (59) (22) (29) (11) 15 Sales (54) - (15) - - - Other (activity under $5 million) (100) (53) (69) (93) (78) - - ------------------------------------------------------------------------------------------------------------------------------------ Commercial loan activity 61 85 280 28 (163) (28) - ------------------------------------------------------------------------------------------------------------------------------------ Consumer loan activity Transfers to assets held for sale (123) (90) - - (243) (37) Other, net 52 63 48 39 20 (17) - ------------------------------------------------------------------------------------------------------------------------------------ Consumer loan activity (71) (27) 48 39 (223) - - ------------------------------------------------------------------------------------------------------------------------------------ Change in nonperforming assets (10) 58 328 67 (386) - - ------------------------------------------------------------------------------------------------------------------------------------ Balance, end of period $ 1,327 1,337 1,279 951 884 (1) % - ------------------------------------------------------------------------------------------------------------------------------------ (a) Excludes nonperforming loans included in assets held for sale, which in the second and first quarters of 2001 and in the fourth, third and second quarters of 2000 were $250 million, $334 million, $349 million and $331 million, respectively. - ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Transferred $123 million of consumer NPLs to assets held for sale; sale expected to close in 3Q01 o NPAs including assets held for sale declined by $104 million or 6% Nonperforming assets declined slightly by $10 million and, including NPAs in assets held for sale, declined $104 million or 6%. While new nonaccrual commercial loan balances rose by $56 million, the increase was more than offset by sales, payments and the return to performing status of certain loans. Consumer NPLs and NPAs in assets held for sale were also lower. During the quarter, the company sold $54 million of commercial and $13 million of consumer nonperforming loans and an additional $73 million of commercial NPLs and $83 million of consumer NPLs out of assets held for sale. - -------------------------------------------------------------------------------- Page 9 [First Union logo appears here] - -------------------------------------------------------------------------------- LOANS HELD FOR SALE - -------------------
- -------------------------------------------------------------------------------------------------------------------------------- Loans Held for Sale 2001 2000 -------------------------- ---------------------------------------- Second First Fourth Third Second (In millions) Quarter Quarter Quarter Quarter Quarter - -------------------------------------------------------------------------------------------------------------------------------- 2000 Strategic Repositioning Balance, beginning of period $ 689 4,263 4,983 6,326 - Loans transferred to (from) assets held for sale, net (98) - - 719 7,182 Allowance for loan losses related to loans transferred to assets held for sale - - 2 (166) (856) Lower of cost or market valuation adjustments (21) (50) (111) - - Loans sold (190) (3,327) (289) (1,756) - Other, net (a) (63) (197) (322) (140) - - -------------------------------------------------------------------------------------------------------------------------------- Balance, end of period 317 689 4,263 4,983 6,326 - -------------------------------------------------------------------------------------------------------------------------------- Other (b) Balance, beginning of period 6,101 3,883 4,108 4,310 4,875 Originations 5,279 4,773 2,701 2,495 1,568 Loans transferred to (from) assets held for sale, net 37 282 (556) (24) (515) Allowance for loan losses related to loans transferred to assets held for sale (40) (23) - - - Lower of cost or market valuation adjustments (14) (30) (33) (46) (53) Loans sold (5,475) (2,628) (2,204) (2,587) (1,408) Other, net (a) (242) (156) (133) (40) (157) - -------------------------------------------------------------------------------------------------------------------------------- Balance, end of period 5,646 6,101 3,883 4,108 4,310 - -------------------------------------------------------------------------------------------------------------------------------- Loans held for sale, end of period $ 5,963 6,790 8,146 9,091 10,636 - -------------------------------------------------------------------------------------------------------------------------------- (a) Other, net represents primarily loan payments. (b) Other includes primarily student, mortgage warehouse, home equity and syndication loans. Nonperforming loans included in assets held for sale in the second and first quarters of 2001 and in the fourth, third, and second quarters of 2000 were $250 million, $344 million, $334 million, $349 million and $331 million, respectively. - --------------------------------------------------------------------------------------------------------------------------------
Key Points o Sold $190 million of loans from strategic repositioning portfolio o $317 million remains from repositioning; sale of $152 million of loans expected to close in early 3Q01 o Strategic repositioning is now complete Strategic Repositioning: During the quarter we sold $68 million of commercial loans and $122 million of TMS loans in assets held for sale. Payments reduced balances by $65 million. A balance of $317 million remains from the total restructuring. $152 million of these loans are under contract for sale in 3Q01. Other: During the quarter we transferred $131 million of consumer loans, $123 million of which were NPLs, to assets held for sale. The sale of these loans is expected to close in 3Q01. Of the total $40 million allowance transferred with the loans, $22 million were existing reserves and $18 million represented 2Q01 additional provision to adjust the loans to market value. We also sold $670 million of commercial loans and $4.8 billion of consumer loans, primarily mortgages delivered to agencies out of the AHFS portfolio. - -------------------------------------------------------------------------------- Page 10 [First Union logo appears here] - -------------------------------------------------------------------------------- Restructuring and Divestitures - ------------------------------
- ------------------------------------------------------------------------------------------------------------------------ Restructuring Charges and Other Charges/Gains 2001 2000 ---------------------- --------------------------------------- Second First Fourth Third Second (In millions) Quarter Quarter Quarter Quarter Quarter - ------------------------------------------------------------------------------------------------------------------------ Restructuring charges Employee termination benefits $ (26) 2 10 27 135 Occupancy (32) - - 15 93 Goodwill and other asset impairments (noncash) - - - - 1,754 Other asset impairments - (1) (1) (16) 35 Contract cancellations (15) (1) (10) 4 80 Other - - 1 - 2 - ------------------------------------------------------------------------------------------------------------------------ Total restructuring charges (73) - - 30 2,099 Reversal of March 1999 and other accruals - (14) (1) (2) - - ------------------------------------------------------------------------------------------------------------------------ Total (73) (14) (1) 28 2,099 Merger-related charges 4 16 34 24 11 - ------------------------------------------------------------------------------------------------------------------------ Total (69) 2 33 52 2,110 - ------------------------------------------------------------------------------------------------------------------------ Other charges/gains Provision for loan losses - - - 180 802 Service charges and fees - - - 2 44 Other income (1) (28) (171) (540) 768 Other noninterest expense 97 69 212 68 27 - ------------------------------------------------------------------------------------------------------------------------ Total other charges/gains 96 41 41 (290) 1,641 - ------------------------------------------------------------------------------------------------------------------------ Total restructuring and other charges/gains 27 43 74 (238) 3,751 Income taxes (benefits) (11) (17) (38) 88 (838) - ------------------------------------------------------------------------------------------------------------------------ After-tax restructuring, merger-related and other charges/gains $ 16 26 36 (150) 2,913 - ------------------------------------------------------------------------------------------------------------------------
Key Points o Completed June 2000 strategic repositioning efforts on schedule and on budget o $73 million reversal due to favorable variances on occupancy and contract termination costs, and lower severance costs o $97 million other noninterest expense largely comprised of related personnel expense to right-size staff and support functions, real estate consolidation expenses, contract termination costs and professional fees In 2Q01, we achieved the goals set out in our June 2000 strategic repositioning. The company recorded a net after-tax charge of $16 million in restructuring and other charges and gains. This charge reflects completion of the activity associated with our strategic repositioning. Significant items included the following: o Net reversals of previously accrued restructuring charges totaling $73 million reflect favorable variance on contract termination and occupancy costs, and lower severance costs for employees identified at the time of the announcement of our strategic repositioning. o Other noninterest expense includes severance and outplacement expense of $31 million related to the right-sizing of staff and support functions; real estate consolidation expenses of $18 million; contract termination expenses of $16 million; professional fees of $12 million; card and mortgage servicing deconversion expenses of $9 million and other expenses totaling $11 million. BUSINESS SEGMENT RESULTS - ------------------------ - -------------------------------------------------------------------------------- Page 11 [First Union logo appears here] - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------- First Union Corporation Three Months Ended June 30, 2001 ----------------------------------------------------------------------------------- Performance Summary General Capital Corporate & (In millions) Bank Management Investment BParent Consolidated - -------------------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 1,128 78 455 50 1,711 Fee and other income 390 771 333 135 1,629 Intersegment revenue 27 (11) (15) (1) - - -------------------------------------------------------------------------------------------------------------------------------- Total revenue 1,545 838 773 184 3,340 Provision for loan losses 98 - 93 32 223 Noninterest expense 935 667 490 77 2,169 Income taxes 169 58 37 35 299 - -------------------------------------------------------------------------------------------------------------------------------- Operating earnings $ 343 113 153 40 649 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ 251 82 (4) 79 408 Risk adjusted return on capital (RAROC) 38.93 % 45.32 11.74 34.82 25.39 Economic capital $ 3,744 986 6,112 1,382 12,224 Overhead efficiency ratio 59.29 % 79.47 59.93 9.32 62.06 Average loans, net $ 65,501 4,559 41,145 8,007 119,212 Average core deposits $ 99,424 7,976 10,202 1,433 119,035 - --------------------------------------------------------------------------------------------------------------------------------
Business segment results are on an operating basis, and accordingly, they exclude restructuring and other charges and gains primarily related to our strategic repositioning announced in June 2000. We made several changes, as outlined below, in our segment reporting beginning 1Q01. Each of the trailing four quarters has been restated to reflect these changes. Segments and sub-segments have been realigned: As a result of an in-depth review of our management reporting model, we have designed new methodologies and systems that we believe better reflect the evolution of our three core businesses. We implemented this new management reporting model in the first quarter of 2001. One of the key differences was a redefinition of our segments and subsegments. Intersegment revenues and servicing cost allocations have been established: Intersegment revenues (referral fees) are paid from the segment that "owns" a product to the segment that "sells" the product, and they are based upon comparable fees paid in the market and/or upon negotiated amounts which estimate the relative profitability value provided by the selling party. Cost allocation transfers are made for servicing provided from one business segment to another. Improved allocation of capital: Revised studies have been completed to more accurately assess the risks inherent in each business unit, and capital has been assigned based upon that risk assessment. (See economic capital definition.) New financial metrics have been implemented: Business units are measured on several new financial metrics, RAROC and Economic Profit (see definitions below). Cost allocation methodologies have been enhanced: Activity-Based Costing studies have been completed for many business units to better align costs with products and their revenues. - -------------------------------------------------------------------------------- Page 12 [First Union logo appears here] - -------------------------------------------------------------------------------- KEY DEFINITIONS - --------------- Activity-Based Costing - A method of determining product costs based upon detailed studies that align the cost of activities with the products those activities support. Cost of Capital -The cost of capital rate is the minimum rate of return that must be earned so as not to dilute shareholder value. First Union's cost of capital rate has been established using the capital asset pricing model (CAPM) and is currently set at 12 percent. The cost of capital charge is determined by multiplying the cost of capital rate times the amount of economic capital. Economic Capital - Capital assigned based on a statistical assessment of the credit, market and operating risks taken to generate profits in a particular business unit and/or product. Economic Net Income - GAAP net income adjusted for intangibles amortization and the after-tax impact of expected losses vs. GAAP loan loss provision. Economic Profit - Economic net income less the cost of capital charge. Expected Losses - A long-term measure of credit losses expected on a specific loan or loan portfolio. The loss assigned is based upon studies that analyze the average annual loss rate on groups of loans across multiple business cycles. RAROC - Risk Adjusted Return On Capital. RAROC is calculated by dividing economic net income by economic capital. - -------------------------------------------------------------------------------- Page 13 [First Union logo appears here] - -------------------------------------------------------------------------------- GENERAL BANK - ------------ This segment consists of the Consumer, Commercial, and Small Business operations.
- ------------------------------------------------------------------------------------------------------------------------ General Bank 2001 2000 2 Q 01 --------------------- ---------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------ Income statement data Net interest income $ 1,128 1,085 1,093 1,097 1,086 4 % Fee and other income 390 343 355 352 301 14 Intersegment revenue 27 25 25 24 25 8 - ------------------------------------------------------------------------------------------------------------------------ Total revenue 1,545 1,453 1,473 1,473 1,412 6 Provision for loan losses 98 101 74 52 51 (3) Noninterest expense 935 908 992 948 966 3 Income taxes 169 149 129 154 127 13 - ------------------------------------------------------------------------------------------------------------------------ Operating earnings $ 343 295 278 319 268 16 % - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Performance and other data Economic profit $ 251 220 183 212 165 14 % Risk adjusted return on capital (RAROC) 38.93 % 36.65 31.97 35.33 30.70 - Economic capital $ 3,744 3,618 3,653 3,615 3,555 3 Overhead efficiency ratio 59.29 % 61.19 65.77 62.89 66.83 - Average loans, net $ 65,501 63,771 61,735 60,029 58,105 3 Average core deposits $ 99,424 98,415 98,184 97,186 97,499 1 % - ------------------------------------------------------------------------------------------------------------------------
Key Points o Revenues up 6%; up 4% excluding mortgage contribution o Fee growth driven by service charges and fees, which increased 7% o Solid loan growth of 3% and deposits up 1%, driven by strong growth of 4% in low cost core deposits (DDA, interest checking, savings, and money market accounts) o Efficiency ratio below 60% for the first time; 14% growth in economic profit
- -------------------------------------------------------------------------------------------------------------------------- General Bank Key Metrics 2001 2000 2 Q 01 -------------------------- --------------------------------- Second First Fourth Third Second vs Quarter Quarter Quarter Quarter Quarter 1 Q 01 - -------------------------------------------------------------------------------------------------------------------------- Customer overall satisfaction score (a) 6.32 6.29 6.27 6.22 6.19 - % Online customers (In thousands) 2,903 2,640 2,367 2,149 1,868 10 Financial centers 2,162 2,164 2,193 2,253 2,258 - ATMs 3,419 3,676 3,772 3,831 3,832 (7)% - -------------------------------------------------------------------------------------------------------------------------- (a) Gallup survey measured on a 1-7 scale; 6.4 = "best in class". - --------------------------------------------------------------------------------------------------------------------------
Overall customer satisfaction score of 6.32 increased for the 9th consecutive quarter and is close to "Best in Class." ATM count down due to sale and removal of certain non-branded ATMs. - -------------------------------------------------------------------------------- Page 14 [First Union logo appears here] - -------------------------------------------------------------------------------- CONSUMER This sub-segment includes Retail Banking, First Union Mortgage Corp., First Union Home Equity Bank, Educaid, and other retail businesses.
- --------------------------------------------------------------------------------------------------------------------- Consumer 2001 2000 2 Q 01 --------------------- ---------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - --------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 793 755 746 759 755 5 % Fee and other income 299 256 267 251 231 17 Intersegment revenue 12 12 12 12 13 - - --------------------------------------------------------------------------------------------------------------------- Total revenue 1,104 1,023 1,025 1,022 999 8 Provision for loan losses 62 59 35 32 31 5 Noninterest expense 731 704 751 732 738 4 Income taxes 106 90 81 88 77 18 - --------------------------------------------------------------------------------------------------------------------- Operating earnings $ 205 170 158 170 153 21 % - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ 162 140 112 124 108 16 % Risk adjusted return on capital (RAROC) 43.26 % 41.12 34.73 37.44 34.71 - Economic capital $ 2,076 1,952 1,960 1,936 1,907 6 Overhead efficiency ratio 65.15 % 67.61 72.03 70.42 72.58 - Average loans, net $ 34,307 33,034 31,942 30,703 29,246 4 Average core deposits $ 80,607 80,241 79,897 79,504 79,838 - % - ---------------------------------------------------------------------------------------------------------------------
Net interest income was up 5%, due to high mortgage origination volume, record loan production in financial centers and overall wider spreads in a declining interest rate environment. Loans increased 4%, due to strong demand and focused sales efforts. At the same time, core deposits increased for the third consecutive quarter on the strength of interest checking and savings; slightly offset by declines in CDs. Fee and other income grew 17%, primarily due to strong growth in mortgage originations, debit card, and service charges and fees. Fees were up 9% excluding the contribution from the mortgage business, driven by a 7% increase in service charges and fees from 1Q01. In retail banking alone, service charges and fees were up $9 million or 4%. 2Q01 mortgage and home equity results included $22 million in gains on $3.7 billion in deliveries to agencies, $12 million in gains on flow servicing sales, and $9 million on other sales. 1Q01 included $6 million in gains on deliveries, $12 million in gains on flow servicing sales, and $10 million in other gains. Results were impacted by market valuation adjustments of $15 million on FUHEB NPAs in 1Q01. Expenses were up 4%, primarily due to increases in volume-based expenses such as loan costs and incentives. Even with tighter expense control, we are currently running close to 100% staffing levels. - -------------------------------------------------------------------------------- Page 15 [First Union logo appears here] - -------------------------------------------------------------------------------- CONSUMER LOAN PRODUCTION
- ------------------------------------------------------------------------------------------------------------------------ Consumer Loan Volume 2001 2000 2 Q 01 ------------------------ --------------------------------- Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------ Consumer direct $ 1,755 1,210 1,246 1,320 1,548 45 % Prime equity lines 2,483 1,984 1,785 1,653 1,852 25 First Union Home Equity 1,558 1,274 1,289 1,245 1,083 22 First Union Mortgage Corporation 4,685 3,394 2,415 2,311 2,434 38 Other 731 728 360 392 185 - - ------------------------------------------------------------------------------------------------------------------------ Total consumer loan volume $ 11,212 8,590 7,095 6,921 7,102 31 % - ------------------------------------------------------------------------------------------------------------------------
Loan volume was up 31%, due primarily to increased refinancing volume in FUMC originations, as well as strong growth in FUHEB volume.
- -------------------------------------------------------------------------------------------------------------------------- Consumer Average Loans 2001 2000 2 Q 01 -------------------- ----------------------------------- Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - -------------------------------------------------------------------------------------------------------------------------- Consumer direct $ 12,595 12,024 11,784 11,496 11,102 5 % Prime equity lines 9,738 9,319 8,873 8,435 8,118 4 First Union Home Equity 11,383 11,097 10,577 10,053 9,295 3 First Union Mortgage Corporation 87 89 82 90 105 (2) Other 504 505 626 629 626 (0) - -------------------------------------------------------------------------------------------------------------------------- Consumer average loans $ 34,307 33,034 31,942 30,703 29,246 4 % - --------------------------------------------------------------------------------------------------------------------------
Average loan outstandings increased 4%, attributable to continued strong sales efforts and increased focus on behavioral cross-selling (acquiring transactional, borrowing and investing customers). - -------------------------------------------------------------------------------- Page 16 [First Union logo appears here] - -------------------------------------------------------------------------------- COMMERCIAL This sub-segment includes middle-market Commercial, Commercial Real Estate and Government Banking.
- ----------------------------------------------------------------------------------------------------------------------------- Commercial 2001 2000 2 Q 01 --------------------- ------------------------------------ Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ----------------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 172 169 179 172 170 2 % Fee and other income 39 35 36 33 33 11 Intersegment revenue 14 12 13 12 12 17 - ----------------------------------------------------------------------------------------------------------------------------- Total revenue 225 216 228 217 215 4 Provision for loan losses 17 21 29 17 18 (19) Noninterest expense 112 107 150 129 139 5 Income taxes 28 27 9 20 13 4 - ----------------------------------------------------------------------------------------------------------------------------- Operating earnings $ 68 61 40 51 45 11 % - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ 30 24 7 11 6 25 % Risk adjusted return on capital (RAROC) 22.99 % 20.76 14.59 16.05 14.20 - Economic capital $ 1,098 1,116 1,146 1,130 1,129 (2) Overhead efficiency ratio 47.39 % 47.92 62.26 56.71 61.18 - Average loans, net $ 23,320 23,204 22,472 22,077 21,926 - Average core deposits $ 10,106 9,479 9,467 8,908 8,967 7 % - -----------------------------------------------------------------------------------------------------------------------------
Net interest income increased 2%. Loans were essentially flat, due to a slowing in loan demand in this sub-segment's customer base. Deposits were up a solid 7%, driven by continued focus on attracting low cost core deposits. Fee and other income grew 11%, due to increased cash management service charges (on lower compensating balances) as a result of a lower interest rate environment. Service charges and fees were up $5 million or 15% from the prior quarter. Results were particularly strong in government and real estate. Expenses increased 5%, wholly attributable to volume-based expenses. - -------------------------------------------------------------------------------- Page 17 [First Union logo appears here] - -------------------------------------------------------------------------------- SMALL BUSINESS This sub-segment consists of Small Business Lending, Small Business Banking, and Small Business Capital (SBA).
- ---------------------------------------------------------------------------------------------------------------------------- Small Business 2001 2000 2 Q 01 ------------------ --------------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) uarter Quarter Quarter Quarter Quarter 1 Q 01 - ---------------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 163 161 168 166 161 1 % Fee and other income 52 52 52 68 37 - Intersegment revenue 1 1 - - - - - ---------------------------------------------------------------------------------------------------------------------------- Total revenue 216 214 220 234 198 1 Provision for loan losses 19 21 10 3 2 (10) Noninterest expense 92 97 91 87 89 (5) Income taxes 35 32 39 46 37 9 - ---------------------------------------------------------------------------------------------------------------------------- Operating earnings $ 70 64 80 98 70 9 % - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ 59 56 64 77 51 5 % Risk adjusted return on capital (RAROC) 53.89 % 53.06 58.56 67.60 51.89 - Economic capital $ 570 550 547 549 519 4 Overhead efficiency ratio 42.26 % 44.21 40.62 36.18 44.24 - Average loans, net $ 7,874 7,533 7,321 7,249 6,933 5 Average core deposits $ 8,711 8,695 8,820 8,774 8,694 - % - ----------------------------------------------------------------------------------------------------------------------------
Net interest income rose 1%. Loans increased 5% driven by small business lending, while average core deposits were relatively flat. Fee and other income matched 1Q01 levels, as securitization and service charge income was flat. Expenses decreased 5%, due to tighter expense control. - -------------------------------------------------------------------------------- Page 18 [First Union logo appears here] - -------------------------------------------------------------------------------- CAPITAL MANAGEMENT - ------------------ This segment includes Asset Management, Retail Brokerage Services, and Wealth and Trust Services
- ---------------------------------------------------------------------------------------------------------------------- Capital Management 2001 2000 2 Q 01 -------------------- ---------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ---------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 78 78 89 86 90 - % Fee and other income 771 765 777 761 752 1 Intersegment revenue (11) (12) (12) (13) (13) (8) - ---------------------------------------------------------------------------------------------------------------------- Total revenue 838 831 854 834 829 1 Provision for loan losses - - - - - - Noninterest expense 667 659 654 652 624 1 Income taxes 58 59 68 62 70 (2) - ---------------------------------------------------------------------------------------------------------------------- Operating earnings $ 113 113 132 120 135 - % - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ 82 82 101 90 105 - % Risk adjusted return on capital (RAROC) 45.32 % 45.93 53.10 48.45 55.54 - Economic capital $ 986 985 974 979 972 - Overhead efficiency ratio 79.47 % 79.15 76.66 78.11 75.23 - Average loans, net $ 4,559 4,497 4,424 4,295 4,250 1 Average core deposits $ 7,976 8,003 7,879 7,935 7,888 - % - ----------------------------------------------------------------------------------------------------------------------
Key Points o Solid revenue performance during continuing market volatility o In Retail Brokerage, record bank annuity sales over $700 million drove increased production - ---------------------------------------------------------------------------------------------------------------------------- Capital Management Key Metrics 2001 2000 2 Q 01 ------------------------ ----------------------------------- Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ---------------------------------------------------------------------------------------------------------------------------- Trust assets $ 81,879 81,576 85,933 87,922 83,499 - % Mutual fund assets 90,279 86,767 84,797 85,223 82,131 4 - ---------------------------------------------------------------------------------------------------------------------------- Total assets under management $ 172,158 168,343 170,730 173,145 165,630 2 % - ---------------------------------------------------------------------------------------------------------------------------- Gross fluctuating mutual fund sales $ 1,981 1,983 1,762 1,819 1,656 - % - ---------------------------------------------------------------------------------------------------------------------------- Assets under care (Excluding AUM) $ 499,847 489,380 485,516 500,962 507,193 2 % - ---------------------------------------------------------------------------------------------------------------------------- Registered representatives (Actual) 7,706 7,784 7,459 7,342 7,091 (1) Brokerage offices (Actual) 2,690 2,695 2,568 2,623 2,604 - % - ----------------------------------------------------------------------------------------------------------------------------
Key Points o Mutual funds surpassed $90 billion for the first time - equity increased 5%, money market up 4%, and fixed income stable o Despite unsettled market conditions, total assets under management increased 2% to $172 billion as both trust and mutual funds gained net new assets - -------------------------------------------------------------------------------- Page 19 [First Union logo appears here] - -------------------------------------------------------------------------------- ASSET MANAGEMENT This sub-segment consists of the mutual fund business and customized investment advisory services.
- ----------------------------------------------------------------------------------------------------------------------- Asset Management 2001 2000 2 Q 01 -------------------- -------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ----------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ (14) (11) (8) (8) (5) (27)% Fee and other income 153 156 162 164 152 (2) Intersegment revenue - - - - - - - ----------------------------------------------------------------------------------------------------------------------- Total revenue 139 145 154 156 147 (4) Provision for loan losses - - - - - - Noninterest expense 90 89 95 89 88 1 Income taxes 16 20 20 23 20 (20) - ----------------------------------------------------------------------------------------------------------------------- Operating earnings $ 33 36 39 44 39 (8)% - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ 29 33 35 40 35 (12)% Risk adjusted return on capital (RAROC) 109.52 % 121.75 123.11 139.70 129.11 - Economic capital $ 122 121 125 125 122 1 Overhead efficiency ratio 64.21 % 61.62 61.93 57.16 59.68 - Average loans, net $ 9 1 - - - - Average core deposits $ 19 5 - - - - % - -----------------------------------------------------------------------------------------------------------------------
Fee and other income decreased 2%, despite continued strong net fund flows, due to lower daily average equity market valuations in 2Q01 versus 1Q01. Expenses remained relatively flat reflecting continued focus on operating efficiency.
- ------------------------------------------------------------------------------------------------------------------------------------ Mutual Funds 2001 2000 2 Q 01 ------------------------------------------- --------------------------------- Second Quarter First Quarter Fourth Third Second vs ------------------- --------------------- (In billions) Amount Fund Mix Amount Fund Mix Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------------------ Assets Under Management Money market $ 55 61% $ 53 61% $ 47 44 41 4 % Equity 23 26 22 25 26 29 29 5 Fixed income 11 12 11 13 11 11 11 - Annuity 1 1 1 1 1 1 1 - - ------------------------------------------------------------------------------------------------------------------------------------ Total mutual fund assets $ 90 100% $ 87 100% $ 85 85 82 4 % - ------------------------------------------------------------------------------------------------------------------------------------
o A balanced investment philosophy and product offering enabled Capital Management to retain assets and grow total assets under management. Total mutual fund assets rose by 4%, spurred by period end improvement in the equity markets and solid net money market sales of $2 billion for the quarter. The fund mix remained relatively stable on a quarter-linked basis, with money market assets growing by 4% and accounting for 61% of total assets and equity funds rising almost 5% to comprise 26% of total assets. - -------------------------------------------------------------------------------- Page 20 [First Union logo appears here] - -------------------------------------------------------------------------------- RETAIL BROKERAGE SERVICES This sub-segment includes Retail Brokerage and Insurance Services.
- --------------------------------------------------------------------------------------------------------------------- Retail Brokerage Services 2001 2000 2 Q 01 --------------------- ----------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - --------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 36 36 41 38 38 - % Fee and other income 499 492 491 480 485 1 Intersegment revenue (11) (11) (12) (12) (13) - - --------------------------------------------------------------------------------------------------------------------- Total revenue 524 517 520 506 510 1 Provision for loan losses - - - - - - Noninterest expense 459 451 446 449 427 2 Income taxes 21 23 24 20 28 (9) - --------------------------------------------------------------------------------------------------------------------- Operating earnings $ 44 43 50 37 55 2 % - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ 26 23 30 18 36 13 % Risk adjusted return on capital (RAROC) 27.50 % 26.57 30.73 22.75 34.41 - Economic capital $ 643 650 643 648 646 (1) Overhead efficiency ratio 87.28 % 87.39 85.55 88.90 83.62 - Average loans, net $ - 1 - 1 - - Average core deposits $ 79 104 79 70 74 (24)% - ---------------------------------------------------------------------------------------------------------------------
Net interest income remained flat, as margin loan receivables have stabilized. Fee and other income was up $7 million or 1%, aided by strong annuity sales and increased broker client assets which rose 5% during the quarter driven by the continued success of the advice-driven distribution model. Expenses increased 2% due primarily to costs associated with higher levels of production.
- -------------------------------------------------------------------------------------------------------------------------- Retail Brokerage Metrics 2001 2000 2 Q 01 ---------------------- ------------------------------------ Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - -------------------------------------------------------------------------------------------------------------------------- Broker client assets $ 205,000 196,069 204,742 216,012 202,017 5 % - -------------------------------------------------------------------------------------------------------------------------- Margin loans $ 3,060 3,060 3,556 4,013 3,613 - % - -------------------------------------------------------------------------------------------------------------------------- Asset management accounts Number of accounts (In thousands) 974 990 993 972 889 (2)% - -------------------------------------------------------------------------------------------------------------------------- Licensed sales force Full-service financial advisors 4,678 4,723 4,322 4,255 3,916 (1)% Financial center series 6 3,028 3,061 3,137 3,087 3,175 (1) - -------------------------------------------------------------------------------------------------------------------------- Total sales force 7,706 7,784 7,459 7,342 7,091 (1)% - --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Page 21 [First Union logo appears here] - -------------------------------------------------------------------------------- WEALTH AND TRUST SERVICES This sub-segment includes the Private Client business, offering services to high net worth individuals, and Corporate and Institutional Trust.
- ------------------------------------------------------------------------------------------------------------------------ Wealth and Trust Services 2001 2000 2 Q 01 -------------------- --------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------ Income statement data Net interest income $ 54 52 54 55 56 4 % Fee and other income 129 128 133 130 129 1 Intersegment revenue 1 (1) (1) (1) (1) - - ------------------------------------------------------------------------------------------------------------------------ Total revenue 184 179 186 184 184 3 Provision for loan losses - - - - - - Noninterest expense 128 128 123 122 119 - Income taxes 20 17 21 21 22 18 - ------------------------------------------------------------------------------------------------------------------------ Operating earnings $ 36 34 42 41 43 6 % - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Performance and other data Economic profit $ 27 27 34 33 36 - % Risk adjusted return on capital (RAROC) 61.68 % 61.62 77.65 75.64 81.84 - Economic capital $ 225 217 209 208 207 4 Overhead efficiency ratio 69.69 % 70.60 65.82 66.32 64.33 - Average loans, net $ 4,550 4,496 4,423 4,295 4,249 1 Average core deposits $ 7,878 7,894 7,800 7,865 7,814 - % - ------------------------------------------------------------------------------------------------------------------------
Net interest income increased 4% due to improved spreads as higher Private Client deposits offset a decline in corporate deposits. The loan portfolio was up slightly and benefited from a declining interest rate environment. Fee and other income rose slightly, as continued positive net customer growth offset the decline in average equity market values. Expenses were flat for the quarter reflecting the continued focus on efficiency. CAPITAL MANAGEMENT OTHER In addition to the above sub-segments, Capital Management results include eliminations among business units. Certain brokerage commissions earned on mutual fund sales by the First Union brokerage sales force are eliminated and deferred in the consolidation of Capital Management reported results. For 2Q01, brokerage revenue and associated expense eliminations were $9 million and had no net effect on earnings. - -------------------------------------------------------------------------------- Page 22 [First Union logo appears here] - -------------------------------------------------------------------------------- CORPORATE AND INVESTMENT BANKING - -------------------------------- This segment includes Corporate Banking and Investment Banking.
- ---------------------------------------------------------------------------------------------------------------------- Corporate and Investment Banking 2001 2000 2 Q 01 ------------------- --------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ---------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 455 425 415 398 376 7 % Fee and other income 333 312 268 363 533 7 Intersegment revenue (15) (12) (13) (12) (12) (25) - ---------------------------------------------------------------------------------------------------------------------- Total revenue 773 725 670 749 897 7 Provision for loan losses 93 70 124 83 126 33 Noninterest expense 490 467 431 498 509 5 Income taxes 37 38 (53) 30 63 (3) - ---------------------------------------------------------------------------------------------------------------------- Operating earnings $ 153 150 168 138 199 2 % - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ (4) (22) 28 (25) 72 82 % Risk adjusted return on capital (RAROC) 11.74 % 10.60 13.81 10.38 16.91 - Economic capital $ 6,112 6,278 6,259 6,167 5,940 (3) Overhead efficiency ratio 59.93 % 60.85 53.28 62.99 54.36 - Average loans, net $ 41,145 42,511 41,922 42,169 42,787 (3) Average core deposits $ 10,202 9,465 9,251 9,099 8,928 8 % - ----------------------------------------------------------------------------------------------------------------------
Key Points o Total revenue up 7% o Net interest income up 7% as fixed income spreads widened in a lower rate environment o Fee and other income increased 7% on strong results in agency businesses, primarily Loan Syndications and M&A, offset by lower trading profits after a record first quarter o Expenses up primarily due to higher incentive payments as a result of increased revenue, especially in agency businesses - -------------------------------------------------------------------------------- Page 23 [First Union logo appears here] - -------------------------------------------------------------------------------- Excluding Principal Investing - -----------------------------
- ------------------------------------------------------------------------------------------------------------------------ Corporate and Investment Banking (Excluding Principal Investing) 2001 2000 2 Q 01 --------------------- -------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------ Income statement data Total revenue $ 840 780 716 725 696 8 % Noninterest expense 482 459 424 490 506 5 Income taxes 62 60 (34) 24 (6) 3 Operating earnings $ 204 191 204 128 68 7 % - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Performance and other data Economic profit $ 86 60 104 2 (25) 43 % Risk adjusted return on capital (RAROC) 19.25 % 16.92 20.39 12.16 9.93 - Economic capital $ 4,773 4,909 4,910 4,915 4,837 (3)% Overhead efficiency ratio 54.40 % 55.76 51.56 63.76 68.53 - - ------------------------------------------------------------------------------------------------------------------------
Revenue increased $60 million or 8% versus 1Q01 and $144 million or 21% vs. 2Q00. The increase versus 1Q01 is due to strong agency results, particularly in M&A and loan syndications, and continued strong trading results in fixed income. The increase versus 2Q00 is due to across-the-board growth, with lower results seen only in asset securitization (due to 2Q01 securities losses), derivatives, and leasing. Expenses increased 5% versus 1Q01, the result of higher incentive payments on increased revenues. Expenses decreased 5% versus 2Q00, due to careful expense management. Operating earnings rose 7% vs. 1Q01 and more than doubled compared to 2Q00. Overhead efficiency and economic profit improved significantly versus both periods. - -------------------------------------------------------------------------------- Page 24 [First Union logo appears here] - -------------------------------------------------------------------------------- CORPORATE BANKING This sub-segment includes Large Corporate Lending, Commercial Leasing and Rail, and International operations.
- ------------------------------------------------------------------------------------------------------------------------ Corporate Banking 2001 2000 2 Q 01 --------------------- --------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------ Income statement data Net interest income $ 345 343 363 354 337 1 % Fee and other income 174 165 169 162 157 5 Intersegment revenue (8) (8) (9) (10) (10) - - ------------------------------------------------------------------------------------------------------------------------ Total revenue 511 500 523 506 484 2 Provision for loan losses 95 71 123 80 114 34 Noninterest expense 231 239 217 254 220 (3) Income taxes 63 65 63 58 50 (3) - ------------------------------------------------------------------------------------------------------------------------ Operating earnings $ 122 125 120 114 100 (2)% - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Performance and other data Economic profit $ 49 39 63 30 40 26 % Risk adjusted return on capital (RAROC) 17.65 % 16.48 18.85 15.33 16.59 - Economic capital $ 3,478 3,526 3,636 3,565 3,528 (1) Overhead efficiency ratio 45.02 % 47.51 41.58 50.15 45.31 - Average loans, net $ 35,737 36,735 35,729 35,836 36,304 (3) Average core deposits $ 7,753 7,470 7,385 7,362 7,303 4 % - ------------------------------------------------------------------------------------------------------------------------
Net interest income rose 1% due to improved margins in the lower rate environment. Loans declined $1 billion, or 3%, as we exited certain less profitable lending relationships. Core deposits increased 4%, driven by our increased focus on treasury services and overall relationship profitability. Fee and other income increased 5%, due to higher fees in lending businesses and stronger rail car leasing results. Expenses decreased 3% due to continued expense control.
- --------------------------------------------------------------------------------------------------------- Corporate Banking Fees 2001 2000 2 Q 01 -------------------- ---------------------------------- Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - --------------------------------------------------------------------------------------------------------- Lending $ 64 58 72 64 36 10 % Leasing 48 45 37 35 62 7 International 62 62 60 63 59 - - --------------------------------------------------------------------------------------------------------- Corporate banking fees $ 174 165 169 162 157 5 % - ---------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Page 25 [First Union logo appears here] - -------------------------------------------------------------------------------- INVESTMENT BANKING This sub-segment includes Principal Investing, Equity Capital Markets, Loan Syndications, High Yield, M&A, Fixed Income Sales & Trading, Municipal Group, Foreign Exchange, Derivatives, Equity Derivatives, Structured Products, Real Estate Capital Markets and Asset Securitization.
- ---------------------------------------------------------------------------------------------------------------------------- Investment Banking 2001 2000 2 Q 01 ------------------- ------------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ---------------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 110 82 52 44 39 34 % Fee and other income 159 147 99 201 376 8 Intersegment revenue (7) (4) (4) (2) (2) 75 - ---------------------------------------------------------------------------------------------------------------------------- Total revenue 262 225 147 243 413 16 Provision for loan losses (2) (1) 1 3 12 - Noninterest expense 259 228 214 244 289 14 Income taxes (benefits) (26) (27) (116) (28) 13 4 - ---------------------------------------------------------------------------------------------------------------------------- Operating earnings $ 31 25 48 24 99 24 % - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ (53) (61) (35) (55) 32 13 % Risk adjusted return on capital (RAROC) 3.94 % 3.06 6.82 3.60 17.37 - Economic capital $ 2,634 2,752 2,623 2,602 2,412 (4) Overhead efficiency ratio 84.80 % 80.60 74.61 85.83 64.06 - Average loans, net $ 5,408 5,776 6,193 6,333 6,483 (6) Average core deposits $ 2,449 1,995 1,866 1,737 1,625 23 % - ----------------------------------------------------------------------------------------------------------------------------
Net interest income increased 34%, primarily due to wider spreads in fixed income sales and trading, as well as equity and fixed income derivatives, driven by the lower rate environment. Loans decreased 6%, while deposits were up 23%, the latter attributable to significant customer relationship growth in the mortgage servicing group. Fee and other income increased 8% due to strong performance in agency business, especially M&A and Loan Syndications, attributable to higher deal volume. Additionally, asset securitization results were benefited by lower losses on certain nonperforming securities ($26 million of securities losses in 2Q01 vs. $46 million of trading losses in 1Q01). The increase in agency business was partially offset by lower trading gains in fixed income sales and trading, which declined from a strong 1Q01. Principal investing losses were $58 million, primarily due to impairments on private equity investments taken during the quarter. Losses were $43 million in 1Q01. The invested portfolio totaled $2.8 billion at quarter end, of which 10% were public investments, 40% were private direct investments, 30% were fund investments, and the remainder represented mezzanine investments. Expenses increased 14%, due to higher incentive payments as a result of increased revenue, especially in agency businesses. - -------------------------------------------------------------------------------- Page 26 [First Union logo appears here] - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------- Investment Banking Fees 2001 2000 2 Q 01 ------------------- --------------------------------- Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ----------------------------------------------------------------------------------------------------------------- Agency $ 117 44 120 85 114 - % Principal investing (58) (43) (43) 34 205 35 Fixed income 115 165 87 93 75 (30) Affordable housing (AH) (15) (19) (65) (11) (18) (21) - ----------------------------------------------------------------------------------------------------------------- Investment banking fees $ 159 147 99 201 376 8 % - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Memoranda Pre-tax value of AH tax credits 30 29 93 32 31 3 % - ----------------------------------------------------------------------------------------------------------------- Adjusted investment banking fees $ 189 176 192 233 407 7 - ----------------------------------------------------------------------------------------------------------------- Trading profits (included above) $ 110 83 57 70 73 33 % - -----------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Page 27 [First Union logo appears here] - -------------------------------------------------------------------------------- PARENT - ------ This sub-segment includes the Central Money Book, Investment Portfolio, some Consumer Real Estate and Mortgage Business, Divested Businesses and goodwill amortization.
- --------------------------------------------------------------------------------------------------------------------------------- Parent 2001 2000 2 Q 01 ----------------------- ----------------------------------------- Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - --------------------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 50 114 135 253 353 (56)% Fee and other income 135 126 182 169 160 7 Intersegment revenue (1) (1) - 1 - - - --------------------------------------------------------------------------------------------------------------------------------- Total revenue 184 239 317 423 513 (23) Provision for loan losses 32 48 (6) 7 51 (33) Noninterest expense 77 104 55 230 267 (26) Income taxes 35 35 165 61 83 - - --------------------------------------------------------------------------------------------------------------------------------- Operating earnings $ 40 52 103 125 112 (23)% - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ 79 94 99 116 123 (16)% Risk adjusted return on capital (RAROC) 34.82 % 34.98 34.74 35.03 33.11 - Economic capital $ 1,382 1,642 1,730 2,009 2,325 (16) Overhead efficiency ratio 9.32 % 18.46 (4.58) 40.57 37.23 - Average loans, net $ 8,007 9,071 12,012 16,982 27,472 (12) Average core deposits $ 1,433 2,309 3,630 3,854 3,941 (38)% - ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Contribution continues to decline as businesses wind down o 2Q01 fee results include $21 million gain on PEL securitization and sale and $23 million in securities gains; 1Q01 results included $75 million gain on interest in Star Systems and $15 million LOCOMs on loans held for sale o Results include $30 million in provision in excess of business unit charge-offs and provision for loans sold or transferred to held for sale (also $30 million in 1Q01) Net interest income declined 56%, primarily the result of the 1Q01 securitization of TMS loans and planned runoff of the auto loan and leasing portfolio. Loans decreased 12%, due primarily to planned runoff of the indirect auto lending and leasing portfolio of $400 million. Deposits decreased 38%, due primarily to a divestiture impact of an average $434 million in 1Q01 branch sales. Fee and other income grew 7%, the result of a $21 million gain on the securitization and sale of $800 million in prime equity loans and $23 million in securities gains, primarily on mortgage-backed securities. 1Q01 results included a $75 million gain on the exchange of our interest in Star Systems, $3 million in securities losses, and $15 million in market valuation adjustments on commercial loans held for sale. Expenses declined 26%, due to divestitures and the impact of FICA benefits in 1Q01. - -------------------------------------------------------------------------------- Page 28 [First Union logo appears here] - -------------------------------------------------------------------------------- FIRSTUNION.COM
- --------------------------------------------------------------------------------------------------------------------------------- firstunion.com 2001 2000 2 Q 01 ----------------------- ------------------------------------- Second First Fourth Third Second vs (In thousands) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - --------------------------------------------------------------------------------------------------------------------------------- Online customers Retail 2,773 2,529 2,276 2,075 1,813 10 % Wholesale 130 111 91 74 55 17 - --------------------------------------------------------------------------------------------------------------------------------- Total customers online 2,903 2,640 2,367 2,149 1,868 10 Retail enrollments per quarter 297 293 230 290 292 1 - --------------------------------------------------------------------------------------------------------------------------------- Dollar value of transactions (In billions) $ 6.4 4.4 2.2 2.2 2.3 45 % - --------------------------------------------------------------------------------------------------------------------------------- Non-financial transactions (In millions) $ 27.8 24.9 23.2 20.2 19.4 12 % - ---------------------------------------------------------------------------------------------------------------------------------
Online enrollments increased 10% from 1Q01 to 2.9 million. There were 297,000 new enrollments in 2Q01, up 10% from 1Q01. Dollar value of transactions initiated through online banking (billpay and transfers) was $6.4 billion, up 45% from 1Q01 due in large part to an increase in customers to our online Federal Funds Transfer application. FIRST UNION DIRECT
- ---------------------------------------------------------------------------------------------------------------------------- First Union Direct Metrics 2001 2000 2 Q 01 -------------------------- ------------------------------------ Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ---------------------------------------------------------------------------------------------------------------------------- Customer calls to Person 8.4 9.5 9.0 7.0 10.0 (12) % Voice response unit 23.5 24.5 24.2 23.0 23.0 (4) - ---------------------------------------------------------------------------------------------------------------------------- Total calls 31.9 34.0 33.2 30.0 33.0 (6) % Calls handled in 30 seconds or less 72 % 68 73 79 87 6 - ----------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Page 29 [First Union logo appears here] - -------------------------------------------------------------------------------- This Supplemental Earnings Package may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements about the benefits of the merger between First Union Corporation and Wachovia Corporation, including future financial and operating results, cost savings, enhanced revenues, and accretion to reported earnings that may be realized from the merger; (ii) statements with respect to First Union's plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets", "projects" and similar expressions. These statements are based upon the current beliefs and expectations of First Union's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the risk that the businesses of First Union and Wachovia will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the merger on the proposed terms and schedule; (6) the failure of First Union's and Wachovia's stockholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength of the local economies in which First Union conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on First Union's loan portfolio and allowance for loan losses; (9) changes in the U.S. and foreign legal and regulatory framework; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on First Union's and the combined company's capital markets and asset management activities. Additional factors that could cause First Union's results to differ materially from those described in the forward-looking statements can be found in First Union's reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction with Wachovia or other matters attributable to First Union or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. First Union does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made. Additional Information The proposed merger between First Union and Wachovia will be submitted to First Union's and Wachovia's stockholders for their consideration. Stockholders are urged to read the definitive joint proxy statement/prospectus regarding the proposed transaction and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain (or will contain) important information. You will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about First Union and Wachovia, at the SEC's Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC filings that have been or will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to First Union, Investor Relations, One First Union Center, Charlotte, North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations, 100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397). - -------------------------------------------------------------------------------- Page 30 EX-99.C 4 ex99-c_75243.txt THE EARNINGS SLIDE PRESENTATION EXHIBIT 99(c) [First Union logo appears here] 2nd Quarter 2001 Earnings Review July 12, 2001 Second Quarter 2001 Financial [First Union Highlights logo appears here] - -------------------------------------------------------------------------------- Versus 1Q 2001 - -------------- o Exceeded market expectations with EPS of $.73 per share on a cash operating basis or $.66 per share on an operating basis o Total revenue up 3%, 11% annualized, and up in all three core businesses - 24% annualized increase in operating earnings versus 1Q01 - General Bank had an outstanding quarter, displaying continued improvement o Continued strong expense control evident and FTEs declined over 1,900 o Low cost core deposits grew 4% o Provided $30 million in excess of net charge-offs and provision for loans sold or transferred to AHFS o Continued proactive management of loan portfolio through loan sales o Total NPAs declined 6% or $104 million o Tier 1 capital ratio increased for the 4th consecutive quarter to 7.40% o Completed strategic repositioning on time and on budget 1 [First Union Summary Operating Results logo appears here] - --------------------------------------------------------------------------------
Operating Earnings Summary 2001 2000 ------------------ ------------------------- 2 Q 01 Second First Fourth Third Second vs (In millions, except per share data) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------- Net interest income (Tax-equivalent) $ 1,742 1,734 1,757 1,860 1,930 - % Fee and other income 1,629 1,546 1,582 1,645 1,746 5 - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- Total revenue (Tax-equivalent) 3,371 3,280 3,339 3,505 3,676 3 Provision for loan losses 223 219 192 142 228 2 Noninterest expense 2,169 2,138 2,132 2,328 2,366 1 - ------------------------------------------------------------------------------------------------------------------------- Income before income taxes (Tax-equivalent) 979 923 1,015 1,035 1,082 6 Income taxes 299 281 309 307 343 6 Tax-equivalent adjustment 31 32 25 26 25 (3) - ------------------------------------------------------------------------------------------------------------------------- Net income $ 649 610 681 702 714 6 % Net income (Cash basis) $ 723 684 753 778 807 6 % - ------------------------------------------------------------------------------------------------------------------------- Diluted earnings per share $ 0.66 0.62 0.69 0.71 0.73 6 % Diluted earnings per share (Cash basis) $ 0.73 0.69 0.76 0.79 0.82 6 % Return on average stockholders' equity 16.19 % 15.64 15.36 15.76 17.74 - Return on average tangible stockholders' equity (Cash basis) 23.35 % 22.91 21.55 22.15 30.18 -
Key Points o Revenues grew 3% driven by a 5% increase in fee income - operating earnings were up a solid 6% o Focus on expenses continues o Loan loss provision of $223 million exceeds net charge-offs by $66 million and includes provisions of $36 million related to loans sold and transferred to assets held for sale -Net charge-offs $ 157 million -Impact of sales and transfers to held for sale $ 36 -Additional provision $ 30 ----- Total $ 223 million 2 [First Union Key Financial Measures logo appears here] - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------- Operating Basis Performance Highlights 2001 2000 -------------------- --------------------------- 2 Q 01 Second First Fourth Third Second vs (In millions, except per share data) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Cash operating earnings Net income $ 723 684 753 778 807 6 % Diluted earnings per share $ 0.73 0.69 0.76 0.79 0.82 6 Return on average tangible assets 1.19 % 1.15 1.26 1.26 1.30 - Return on average tangible stockholders' equity 23.35 22.91 21.55 22.15 30.18 - Overhead efficiency ratio 62.06 % 62.80 61.46 64.17 61.64 - Operating leverage $ 59 (67) 31 (154) (136) - % - --------------------------------------------------------------------------------------------------------------------------- Other financial data Fee and other income as % of total revenue 48.32 % 47.13 47.38 46.93 47.50 - % Average diluted shares (In thousands) 978,185 975,847 990,445 986,763 981,940 - Actual shares (In thousands) 979,205 981,268 979,963 986,004 986,394 - Dividends paid per common share $ 0.24 0.24 0.48 0.48 0.48 - Dividend payout ratio 36.36 % 38.71 69.57 67.42 65.75 - Book value per share $ 16.49 16.39 15.66 15.00 14.14 1 Tier 1 capital ratio (a) 7.40 % 7.18 7.02 7.00 6.65 - Total capital ratio (a) 11.48 11.33 11.19 11.32 10.57 - Leverage ratio (a) 6.01 % 5.88 5.92 5.73 5.34 - % - --------------------------------------------------------------------------------------------------------------------------- Other FTE employees 67,420 69,362 70,639 70,533 72,890 (3)% - --------------------------------------------------------------------------------------------------------------------------- (a) The second quarter of 2001 is based on estimates.
Key Points o Period-end actual shares declined with 2.1 million shares repurchased during the quarter o Average diluted shares increased due to the vesting of stock awards o Tier 1 capital ratio improved for the 4th consecutive quarter to 7.40% 3 [First Union Net Interest Income logo appears here] - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------- Interest Income Summary 2001 2000 -------------------- --------------------------- 2 Q 01 Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Average earning assets $ 204,673 203,720 202,606 211,089 220,061 - % Average interest-bearing liabilities 185,224 183,995 181,832 190,146 196,954 1 - --------------------------------------------------------------------------------------------------------------------------- Interest income (Tax-equivalent) 3,851 4,057 4,289 4,491 4,517 (5) Interest expense 2,109 2,323 2,532 2,631 2,587 (9) - --------------------------------------------------------------------------------------------------------------------------- Net interest income (Tax-equivalent) $ 1,742 1,734 1,757 1,860 1,930 - % - --------------------------------------------------------------------------------------------------------------------------- Rate earned 7.54 % 8.03 8.44 8.48 8.24 - Equivalent rate paid 4.13 4.61 4.98 4.96 4.73 - - --------------------------------------------------------------------------------------------------------------------------- Net interest margin 3.41 % 3.42 3.46 3.52 3.51 - - ---------------------------------------------------------------------------------------------------------------------------
Key Points o Margin remained relatively flat despite the declining rate environment as higher spreads were offset by the 1Q01 securitization and sale of The Money Store loans and growth in the equity derivatives business 4 [First Union Fee and Other Income logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Fee and Other Income 2001 2000 -------------------- ------------------------------ 2 Q 01 Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ---------------------------------------------------------------------------------------------------------------------------- Service charges and fees $ 486 468 481 508 491 4 % Commissions 389 375 383 365 375 4 Fiduciary and asset management fees 384 381 387 384 374 1 Advisory, underwriting and other investment banking fees 238 198 187 148 182 20 Principal investing (58) (43) (43) 34 205 (35) Other income 190 167 187 206 119 14 - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Total fee and other income $ 1,629 1,546 1,582 1,645 1,746 5 % - ----------------------------------------------------------------------------------------------------------------------------
Key Points o Across-the-board increases in all fee categories except principal investing o Service charges and fees up 4% on strong growth in both the General Bank and o Corporate and Investment Banking o Solid asset management and commissions performance in a challenging market o Corporate and Investment Banking fees up on increased activity in agency businesses o Other income up due to mortgage and home equity-related income 5 [First Union Noninterest Expense logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Noninterest Expense 2001 2000 --------------------- ------------------------------------- 2 Q 01 Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ---------------------------------------------------------------------------------------------------------------------------------- Salaries and employee benefits $ 1,363 1,329 1,243 1,381 1,396 3 % Occupancy 155 163 150 157 155 (5) Equipment 198 205 221 213 210 (3) Advertising 11 9 16 14 31 22 Communications and supplies 111 110 123 117 122 1 Professional and consulting fees 69 73 97 87 82 (5) Goodwill and other intangible amortization 77 78 80 79 100 (1) Sundry expense 185 171 202 280 270 8 - ---------------------------------------------------------------------------------------------------------------------------------- Total noninterest expense $ 2,169 2,138 2,132 2,328 2,366 1 % - ---------------------------------------------------------------------------------------------------------------------------------- FTE employees 67,420 69,362 70,639 70,533 72,890 (3) % Overhead efficiency ratio (Cash basis) 62.06 % 62.80 61.46 64.17 61.64 - - ----------------------------------------------------------------------------------------------------------------------------------
Key Points o Total expenses remained virtually flat o Personnel expenses up modestly due to impact of lower FTEs offset by incentive payments on increased revenue o Sundry expenses increased due to costs associated with higher loan volume o Remaining categories down $17 million in total 6 Consolidated Results [First Union Operating Performance Summary logo appears here] - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------- First Union Corporation Three Months Ended June 30, 2001 ----------------------------------------------------------------------------- Performance Summary General Capital Corporate & (In millions) Bank Management Investment Banking Parent Consolidated - --------------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 1,128 78 455 50 1,711 Fee and other income 390 771 333 135 1,629 Intersegment revenue 27 (11) (15) (1) - - --------------------------------------------------------------------------------------------------------------------------- Total revenue 1,545 838 773 184 3,340 Provision for loan losses 98 - 93 32 223 Noninterest expense 935 667 490 77 2,169 Income taxes 169 58 37 35 299 - --------------------------------------------------------------------------------------------------------------------------- Operating earnings $ 343 113 153 40 649 - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ 251 82 (4) 79 408 Risk adjusted return on capital (RAROC) 38.93 % 45.32 11.74 34.82 25.39 Economic capital $ 3,744 986 6,112 1,382 12,224 Overhead efficiency ratio 59.29 % 79.47 59.93 9.32 62.06 Average loans, net $ 65,501 4,559 41,145 8,007 119,212 Average core deposits $ 99,424 7,976 10,202 1,433 119,035 - ---------------------------------------------------------------------------------------------------------------------------
Key Points o Earnings/Profit: General Bank earned over half of operating earnings and 62% of economic profit o RAROC: Capital Management reported very strong return; Corporate and Investment Banking basically covered its cost of capital o Efficiency Ratio: under 60% except Capital Management which is an inherently high overhead business 7 General Bank [First Union Operating Performance Summary logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ General Bank 2001 2000 ---------------------- --------------------------------- 2 Q 01 2Q 01 Performance Summary Second First Fourth Third Second vs vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 2Q 00 - ------------------------------------------------------------------------------------------------------------------------------------ Income statement data Net interest income $ 1,128 1,085 1,093 1,097 1,086 4 % Fee and other income 390 343 355 352 301 14 Intersegment revenue 27 25 25 24 25 8 - ------------------------------------------------------------------------------------------------------------------------------------ Total revenue 1,545 1,453 1,473 1,473 1,412 6 9 % Provision for loan losses 98 101 74 52 51 (3) Noninterest expense 935 908 992 948 966 3 -3 % Income taxes 169 149 129 154 127 13 - ------------------------------------------------------------------------------------------------------------------------------------ Operating earnings $ 343 295 278 319 268 16 % 28 % - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Performance and other data Economic profit $ 251 220 183 212 165 14 % 52 % Risk adjusted return on capital (RAROC) 38.93 % 36.65 31.97 35.33 30.70 - Economic capital $ 3,744 3,618 3,653 3,615 3,555 3 Overhead efficiency ratio 59.29 % 61.19 65.77 62.89 66.83 - Average loans, net $ 65,501 63,771 61,735 60,029 58,105 3 Average core deposits $ 99,424 98,415 98,184 97,186 97,499 1 % - ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Revenues up 6%; up 4% excluding mortgage contribution o Fee growth driven by service charges and fees, which increased 7% o Solid loan growth of 3% and deposits up 1%, driven by strong growth of 4% in low cost core deposits (DDA, interest checking, savings, and money market accounts) o Efficiency ratio below 60% for the first time; 14% growth in economic profit 8 General Bank [First Union Key Operating Measures logo appears here] - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------- General Bank Key Metrics 2001 2000 ------------------------ ------------------------------------------ 2 Q 01 Second First Fourth Third Second vs Quarter Quarter Quarter Quarter Quarter 1 Q 01 - -------------------------------------------------------------------------------------------------------------------------------- Customer overall satisfaction score (a) 6.32 6.29 6.27 6.22 6.19 - % Online customers (In thousands) 2,903 2,640 2,367 2,149 1,868 10 Financial centers 2,162 2,164 2,193 2,253 2,258 - ATMs 3,419 3,676 3,772 3,831 3,832 (7)% - -------------------------------------------------------------------------------------------------------------------------------- (a) Gallup survey measured on a 1-7 scale; 6.4 = "best in class". - --------------------------------------------------------------------------------------------------------------------------------
Key Points o Financial Centers recorded 9th consecutive quarterly increase in customer satisfaction measures o Customer attrition remains stable at 13%, industry average estimated at approximately 15% o Online customers grew 263,000 or 10% 9 Capital Management [First Union Operating Performance Summary logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Capital Management 2001 2000 ------------------------ -------------------------------- 2 Q 01 Performance Summary Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ----------------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 78 78 89 86 90 - % Fee and other income 771 765 777 761 752 1 Intersegment revenue (11) (12) (12) (13) (13) (8) - ----------------------------------------------------------------------------------------------------------------------------- Total revenue 838 831 854 834 829 1 Provision for loan losses - - - - - - Noninterest expense 667 659 654 652 624 1 Income taxes 58 59 68 62 70 (2) - ----------------------------------------------------------------------------------------------------------------------------- Operating earnings $ 113 113 132 120 135 - % - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ 82 82 101 90 105 - % Risk adjusted return on capital (RAROC) 45.32 % 45.93 53.10 48.45 55.54 - Economic capital $ 986 985 974 979 972 - Overhead efficiency ratio 79.47 % 79.15 76.66 78.11 75.23 - Average loans, net $ 4,559 4,497 4,424 4,295 4,250 1 Average core deposits $ 7,976 8,003 7,879 7,935 7,888 - % - -----------------------------------------------------------------------------------------------------------------------------
Key Points o Solid revenue performance during continuing market volatility o In Retail Brokerage, record bank annuity sales over $700 million drove increased production 10 Capital Management [First Union Key Operating Measures logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Capital Management Key Metrics 2001 2000 ------------------------ -------------------------------------- 2 Q 01 Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - --------------------------------------------------------------------------------------------------------------------------------- Trust assets $ 81,879 81,576 85,933 87,922 83,499 - % Mutual fund assets 90,279 86,767 84,797 85,223 82,131 4 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Total assets under management $ 172,158 168,343 170,730 173,145 165,630 2 % - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Gross fluctuating mutual fund sales $ 1,981 1,983 1,762 1,819 1,656 - % - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Assets under care (Excluding AUM) $ 499,847 489,380 485,516 500,962 507,193 2 % - --------------------------------------------------------------------------------------------------------------------------------- Registered representatives (Actual) 7,706 7,784 7,459 7,342 7,091 (1) Brokerage offices (Actual) 2,690 2,695 2,568 2,623 2,604 - % - ---------------------------------------------------------------------------------------------------------------------------------
Key Points o Mutual funds surpassed $90 billion for the first time - equity increased 5%, money market up 4%, and fixed income stable o Despite unsettled market conditions, total assets under management increased 2% to $172 billion as both trust and mutual funds gained net new assets 11 Corporate and Investment Banking [First Union Operating Performance Summary logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Corporate and Investment Banking 2001 2000 Performance Summary ------------------------ -------------------------------------- 2 Q 01 Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - --------------------------------------------------------------------------------------------------------------------------------- Income statement data Net interest income $ 455 425 415 398 376 7 % Fee and other income 333 312 268 363 533 7 Intersegment revenue (15) (12) (13) (12) (12) (25) - --------------------------------------------------------------------------------------------------------------------------------- Total revenue 773 725 670 749 897 7 Provision for loan losses 93 70 124 83 126 33 Noninterest expense 490 467 431 498 509 5 Income taxes 37 38 (53) 30 63 (3) - --------------------------------------------------------------------------------------------------------------------------------- Operating earnings $ 153 150 168 138 199 2 % - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Performance and other data Economic profit $ (4) (22) 28 (25) 72 82 % Risk adjusted return on capital (RAROC) 11.74 % 10.60 13.81 10.38 16.91 - Economic capital $ 6,112 6,278 6,259 6,167 5,940 (3) Overhead efficiency ratio 59.93 % 60.85 53.28 62.99 54.36 - Average loans, net $ 41,145 42,511 41,922 42,169 42,787 (3) Average core deposits $ 10,202 9,465 9,251 9,099 8,928 8% - ---------------------------------------------------------------------------------------------------------------------------------
Key Points o Total revenue up 7% o Net interest income up 7% as fixed income spreads widened in a lower rate environment o Fee and other income increased 7% on strong results in agency businesses, primarily Loan Syndications and M&A, offset by lower trading profits after a record first quarter o Expenses up primarily due to higher incentive payments as a result of increased revenue, especially in agency businesses 12 [First Union Loan and Deposit Growth logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Average Balance Sheet Data 2001 2000 ------------------------ ------------------------------------- 2 Q 01 Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------------------ Commercial loans $ 76,378 77,270 76,253 75,380 75,951 (1)% Consumer loans 42,834 42,580 43,840 48,095 56,663 1 - ------------------------------------------------------------------------------------------------------------------------------------ Total loans $119,212 119,850 120,093 123,475 132,614 (1)% - ------------------------------------------------------------------------------------------------------------------------------------ Core interest-bearing deposits $ 91,654 91,149 91,069 89,637 89,285 1 % Noninterest-bearing deposits 27,381 27,043 27,875 28,437 28,971 1 - ------------------------------------------------------------------------------------------------------------------------------------ Total core deposits 119,035 118,192 118,944 118,074 118,256 1 Foreign and other time deposits 17,944 19,090 19,385 25,038 22,948 (6) - ------------------------------------------------------------------------------------------------------------------------------------ Total deposits $136,979 137,282 138,329 143,112 141,204 - % - ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Solid consumer loan growth of 2% and small business up 5%, excluding divesitures and securitizations o Core deposits up 1%, despite an average impact of $434 million from divestitures; low cost core deposits up $2.6 billion excluding divestitures o Reduced purchased deposits due to core deposit growth and lower cost alternatives 13 [First Union Restructuring Update logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Restructuring Charges and Other Charges/Gains 2001 2000 ----------------------- ---------------------------------- Second First Fourth Third Second (In millions) Quarter Quarter Quarter Quarter Quarter - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Restructuring charges - ----------------------------------------------------------------------------------------------------------------------------------- Total restructuring charges $ (73) - - 30 2,099 Reversal of March 1999 and other accruals - (14) (1) (2) - - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Total (73) (14) (1) 28 2,099 Merger-related charges 4 16 34 24 11 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Total (69) 2 33 52 2,110 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Other charges/gains Provision for loan losses - - - 180 802 Service charges and fees - - - 2 44 Other income (1) (28) (171) (540) 768 Other noninterest expense 97 69 212 68 27 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Total other charges/gains 96 41 41 (290) 1,641 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Total restructuring and other charges/gains 27 43 74 (238) 3,751 Income taxes (benefits) (11) (17) (38) 88 (838) - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- After-tax restructuring, merger-related and other charges/gains $ 16 26 36 (150) 2,913 - -----------------------------------------------------------------------------------------------------------------------------------
Key Points o Completed June 2000 strategic repositioning efforts on schedule and on budget o $73 million reversal due to favorable variances on occupancy and contract termination costs, and lower severance costs o $97 million other noninterest expense largely comprised of related personnel expense to right-size staff and support functions, real estate consolidation expenses, contract termination costs and professional fees 14 [First Union Asset Quality logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Asset Quality 2001 2000 ---------------------- -------------------------------- 2 Q 01 Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Nonperforming assets Loans $ 1,223 1,231 1,176 854 791 (1) % Other real estate 104 106 103 97 93 (2) Loans in assets held for sale 250 344 334 349 331 (27) - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Total nonperforming assets $ 1,577 1,681 1,613 1,300 1,215 (6) % - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ as % of loans, net 1.08 % 1.09 1.03 0.77 0.69 - - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ as % of loans, net, including assets held for sale 1.23 % 1.30 1.22 0.98 0.87 - - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Allowance for loan losses - ------------------------------------------------------------------------------------------------------------------------------------ Balance, end of period $ 1,760 1,759 1,722 1,720 1,706 - % - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ as % of loans, net 1.44 % 1.43 1.39 1.39 1.33 - as % of nonaccrual and restructured loans (a) 144 143 146 202 215 - as % of nonperforming assets (a) 133 % 132 135 181 193 - - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Loan losses, net $ 157 159 192 142 228 (1) % Commercial, as % of average commercial loans 0.55 % 0.56 0.80 0.53 0.73 - Consumer, as % of average consumer loans 0.48 0.48 0.36 0.35 0.63 - Total, as % of average loans, net 0.52 % 0.53 0.64 0.46 0.69 - - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ (a) These ratios do not include nonperforming loans included in other assets as held for sale. Loans 90 days past due were $213 million, $220 million, $183 million, $145 million and $84 million in the second and first quarters of 2001 and in the fourth, third and second quarters of 2000, respectively. - ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Total NPAs declined 6% o Allowance increased to 1.44% of net loans o Provision exceeded charge-offs by $66 million including the provision for loans sold or transferred to held for sale o Delinquencies 90 days past due were $213 million vs. $220 million at March 31; consumer delinquencies were $187 million as of June 30 o Net charge-offs declined to $157 million or 52 bps 15 [First Union Nonperforming Assets logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Nonperforming Assets (a) 2001 2000 ---------------------- -------------------------------- 2 Q 01 Second First Fourth Third Second vs (In millions) Quarter Quarter Quarter Quarter Quarter 1 Q 01 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Balance, beginning of period $ 1,337 1,279 951 884 1,270 5 % - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Commercial loan activity (over $5 million) New nonaccrual loans and advances 314 266 487 223 242 18 Charge-offs (49) (69) (112) (27) (93) (29) Transfers (to) from assets held for sale - - 11 (46) (223) - Payments and return to accrual status (50) (59) (22) (29) (11) 15 Sales (54) - (15) - - - Other (activity under $5 million) (100) (53) (69) (93) (78) - - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Commercial loan activity 61 85 280 28 (163) (28) - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Consumer loan activity Transfers to assets held for sale (123) (90) - - (243) (37) Other, net 52 63 48 39 20 (17) - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Consumer loan activity (71) (27) 48 39 (223) - - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Change in nonperforming assets (10) 58 328 67 (386) - - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Balance, end of period $ 1,327 1,337 1,279 951 884 (1) % - -------------------------------------------------------------------------------------------------------------------------------- (a) Excludes nonperforming loans included in assets held for sale, which in the second and first quarters of 2001 and in the fourth, third and second quarters of 2000 were $250 million, $344 million, $334 million, $349 million and $331 million, respectively. - --------------------------------------------------------------------------------------------------------------------------------
Key Points o Transferred $123 million of consumer NPLs to assets held for sale; sale expected to close in 3Q01 o NPAs including assets held for sale declined by $104 million or 6% 16 [First Union Loans Held for Sale logo appears here] - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Loans Held for Sale 2001 2000 --------------------- ------------------------------ Second First Fourth Third Second (In millions) Quarter Quarter Quarter Quarter Quarter - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- 2000 Strategic Repositioning Balance, beginning of period $ 689 4,263 4,983 6,326 - Loans transferred to (from) assets held for sale, net (98) - - 719 7,182 Allowance for loan losses related to loans transferred to assets held for sale - - 2 (166) (856) Lower of cost or market valuation adjustments (21) (50) (111) - - Loans sold (190) (3,327) (289) (1,756) - Other, net (a) (63) (197) (322) (140) - - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Balance, end of period 317 689 4,263 4,983 6,326 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Other (b) - --------------------------------------------------------------------------------------------------------------------------------- Balance, end of period 5,646 6,101 3,883 4,108 4,310 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Loans held for sale, end of period $ 5,963 6,790 8,146 9,091 10,636 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- (a) Other, net represents primarily loan payments. (b) Other includes primarily student, mortgage warehouse, home equity and syndication loans. Nonperforming loans included in assets held for sale in the second and first quarters of 2001 and in the fourth, third and second quarters of 2000 were $250 million, $344 million, $334 million, $349 million and $331 million, respectively. - ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Sold $190 million of loans from strategic repositioning portfolio o $317 million remains from repositioning; sale of $152 million of loans expected to close in early 3Q01 o Strategic repositioning is now complete 17 [First Union Summary and Outlook logo appears here] - -------------------------------------------------------------------------------- 2001 - First Union has momentum - ------------------------------- o Strong revenue growth and expense control evident - Revenue growth in all 3 core businesses - General Bank has turned the corner o Reduced NPAs 6% with proactive portfolio management o Added $30 million to the allowance in excess of charge-offs and provision for loans sold or transferred to held for sale o Grew Tier 1 capital 22 bps; 4th consecutive quarter of improvement 2001 First Union Outlook o Goal is to keep NPAs and coverage ratios consistent with 2Q01 levels o Revised charge off guidance for full year 2001 from 60-80 bps to 55-65 bps o Continue to build capital ratios o Core operating earnings of $.66 per share provides foundation for continued growth o Wachovia merger integration planning proceeding on schedule o Pending approvals, Wachovia merger close to completion; third quarter closing targeted 18 Cautionary Statement This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements about the benefits of the merger between First Union Corporation and Wachovia Corporation, including future financial and operating results, cost savings, enhanced revenues, and accretion to reported earnings that may be realized from the merger; (ii) statements with respect to First Union's plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets", "projects" and similar expressions. These statements are based upon the current beliefs and expectations of First Union's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Thefollowing factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the risk that the businesses of First Union and Wachovia will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the merger on the proposed terms and schedule; (6) the failure of First Union's and Wachovia's stockholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength of the local economies in which First Union conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on First Union's loan portfolio and allowance for loan losses; (9) changes in the U.S. and foreign legal and regulatory framework; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on First Union's and the combined company's capital markets and asset management activities. Additional factors that could cause First Union's results to differ materially from those described in the forward-looking statements can be found in First Union's reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction with Wachovia or other matters attributable to First Union or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. First Union does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made. Additional Information The proposed merger between First Union and Wachovia will be submitted to First Union's and Wachovia's stockholders for their consideration. Stockholders are urged to read the definitive joint proxy statement/prospectus regarding the proposed transaction and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain (or will contain) important information. You will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about First Union and Wachovia, at the SEC's Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC filings that have been or will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to First Union, Investor Relations, One First Union Center, Charlotte, North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations, 100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397). 19 -----END PRIVACY-ENHANCED MESSAGE-----