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April 14, 1998
Solid Revenue Growth Propels First Union's Record Earnings
Solid revenue momentum drove First Union Corporation's first quarter 1998 operating earnings per share up 18 percent, to a record 93 cents on a diluted basis compared with 79 cents in the first quarter of 1997. Operating earnings, which represent earnings before merger-related and restructuring charges, were a record $606 million, an increase of 20 percent from $504 million in the first quarter of 1997. First quarter 1998 operating earnings represent a return on average common equity of 20.21 percent and a return on average assets of 1.50 percent.
Merger-related and restructuring charges of $19 million after-tax were associated with the January 31, 1998, acquisition of Wheat First Butcher Singer Inc. After these charges, earnings were 90 cents per diluted share.
"This was a very solid quarter for First Union, with strong revenue contributions from our Capital Markets and Capital Management businesses; integration of our acquisitions well under way; and the continuing implementation of our Future Bank throughout our branch network," said Edward E. Crutchfield, chairman and chief executive officer. "Product introduction and training are proceeding on schedule in our completed acquisitions. In addition, our work to revamp our branch network is meeting success in the markets where our Future Bank has been implemented. We are very enthusiastic about our future as these efforts begin to translate into revenue growth."
First Union's Capital Markets Group and Capital Management Group continued to be strong contributors to earnings growth in the first quarter of 1998. Including Wheat First Union, Capital Management noninterest income increased 68 percent and Capital Markets noninterest income increased 59 percent from the first quarter of 1997. First Union's 1997 quarterly results have not been restated for Wheat First Union.
First Union's Capital Markets Group provides a variety of sophisticated corporate financing solutions focused on integrating the best of banking with the best of the securities business. The Capital Management Group, with $98 billion in assets under management, provides a comprehensive selection of products and services to meet customers' lifetime financial needs.
The consolidation of Signet's 1 million customers and 3 million accounts into First Union's systems was completed in less than four months following the completion of this pooling of interests acquisition in November 1997. First Union's 1997 quarterly results have been restated for the Signet acquisition.
Key factors, in addition to the contribution of Wheat First Union, in the first quarter of 1998 compared with the first quarter of 1997 include: - A 39 percent increase in noninterest income, led by Capital Markets and Capital Management activity, to $1.1 billion. This amount excludes investment securities transactions.
- A modest decline in net interest income, largely as a result of First Union's strategy to sell or securitize certain loans rather than holding them on the balance sheet. Average net loans were $96 billion compared with $101 billion in the year ago period. First Union continues to pursue a balance sheet management strategy to maximize return on capital. As part of this strategy, $5 billion in consumer loans were securitized or sold in 1997.
- Continuing strength in credit quality. Nonperforming assets as a percentage of net loans and foreclosed properties improved to 0.74 percent from 0.80 percent. Annualized net charge-offs improved to 0.36 percent of average net loans, compared with 0.63 percent in the year-ago period.
First Union's pooling of interests acquisition of Philadelphia-based CoreStates Financial Corp received shareholder approval on February 27, 1998, and Federal Reserve approval on April 13, 1998. On a pro forma basis, the combined company's net income before merger-related and restructuring charges would have been $809 million at March 31, 1998, or, on a diluted earnings per share basis, 83 cents, compared to $702 million and 72 cents in the year ago period. The acquisition is expected to close by April 30, 1998, subject to certain conditions of closing. The combined company will have the leading banking presence on the Eastern Seaboard with the largest share of retail deposits on the East Coast. More information concerning the CoreStates acquisition is available in First Union's Current Reports on Form 8-K filed with the Securities and Exchange Commission (SEC) on November 18, 1997, November 28, 1997, and December 2, 1997; in First Union's registration statement on Form S-4, filed with the SEC on January 9, 1998; and First Union's 1997 Annual Report on Form 10-K.
First Union (NYSE:FTU) is a leading provider of financial services to more than 14 million customers throughout the East Coast and the nation. At March 31, 1998, First Union had assets of $172 billion and total stockholders' equity of $12 billion. On a pro forma basis with CoreStates, the combined company's assets would be $220 billion and total stockholders' equity would be $16 billion. The company operates full-service banking offices in Connecticut, Delaware, Florida, Georgia, Maryland, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and Washington, D.C.
This news release contains various forward-looking statements. A discussion of various factors that could cause First Union's actual results to differ materially from those expressed in such forward-looking statements is included in First Union's filings with the SEC.
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