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First Union Reports Operating Earnings of $2.9 Billion for 2000 and 69 Cents Per Share for the 4th Quarter of 2000
* Income before net merger-related, restructuring and other charges and the cumulative effect of a change in accounting principle. ** Cash operating earnings exclude goodwill and other intangible amortization. CHARLOTTE, N.C. – First Union (NYSE:FTU) today reported 2000 operating earnings of $2.9 billion, or $2.97 per share, before merger-related charges and the previously announced net restructuring and other charges amounting to $2.8 billion, or $2.85 per share, in conjunction with the company's strategic repositioning. After the restructuring charges and net after-tax gains on the sale of certain businesses related to the restructuring, full year 2000 earnings were $138 million (12 cents per share) and $92 million (seven cents per share) after recording an after-tax $46 million charge for the cumulative effect of a change in the accounting for beneficial interests. This compares with $3.2 billion, or $3.33, in 1999, which included 20 cents per share from the sale of businesses. In the fourth quarter of 2000, operating earnings were $681 million, or 69 cents per share, before $36 million in net merger-related, restructuring and other charges. After these charges, fourth quarter 2000 earnings were $645 million (65 cents per share) and $599 million (60 cents per share) after the accounting change. This compares with $842 million (86 cents per share) in the fourth quarter of 1999. Based on full year 2000 operating earnings, First Union's return on average stockholders' equity (ROE) was 17.23 percent in 2000 compared with 21.60 percent in 1999. Diluted cash earnings before net merger-related, restructuring and other charges and the accounting change were 76 cents per share in the fourth quarter of 2000 and $3.30 per share in the full year of 2000, down 20 percent from the fourth quarter of 1999 and 16 percent from the full year of 1999. On the same basis, the cash return on average tangible stockholders' equity was 21.55 percent in the fourth quarter of 2000 and 26.33 percent in the full year 2000. Cash earnings are earnings before goodwill and other intangible amortization. "We believe that 2000 was a defining year for First Union as we restructured and reset our company's strategic path to prepare us well for the future. It was a year of intensive work at all levels of First Union as we sharpened our focus and streamlined the company for greater efficiency and increased competitiveness," said Ken Thompson, First Union president and CEO. "We now have a growing banking operation, an asset management powerhouse and a tightly focused capital markets business – and our strengths are going to become even more apparent as we move beyond the restructuring and transition years of 2000 and 2001. All of these actions, including the recent decision to reduce the dividend to build capital ratios and to provide strategic flexibility, place us in the best possible position to face a more challenging economic and competitive environment. We will continue to fine-tune and make appropriate capital allocation decisions going forward as we focus our resources more strategically on our three core growth businesses." First Union's new chief financial officer, Bob Kelly, who joined the company's management team on November 13, 2000, commented, "First Union's financial results for the fourth quarter and the full year of 2000 were in line with expectations and give us a good basis for growth. Our underlying fundamentals are good – period-end core deposits were up 2 percent and period-end loans were up 9 percent from the fourth quarter of 1999, excluding divestitures. While revenues were negatively affected by divestitures and difficult financial markets, we had record performance in Capital Management fee and other income. We began to see positive results in the fourth quarter of 2000 from our expense control initiatives of the past year. In addition, the strong efforts of our risk management team to monitor and actively manage the loan portfolio help us limit the deterioration of credit quality in our portfolio even as the entire industry experiences rising nonperforming assets and loan losses. In short, we are enthusiastic that with the restructuring nearing completion, we should begin to see renewed momentum by the end of 2001." Net Interest Income Net interest income on a tax equivalent basis was $1.8 billion in the fourth quarter of 2000, a decline of $214 million from the fourth quarter of 1999, largely due to the impact of divestitures. In full year 2000, net interest income on the same basis was $7.5 billion, flat with full year 1999. The net interest margin was 3.46 percent in the fourth quarter of 2000 and 3.55 percent in the full year of 2000, compared with 3.72 percent and 3.79 percent in the same respective periods of 1999. Fee and Other Income On an operating basis, fee and other income in the fourth quarter of 2000 was $1.6 billion, down 14 percent from the fourth quarter of 1999, excluding securities transactions. In full year 2000, fee and other income was $6.8 billion, down 2 percent from full year 1999 largely due to lower principal investing revenues. Despite the difficult financial markets, asset management and brokerage businesses performed well. These results also reflect the impact of the acquisition of EVEREN Capital Corporation, which was completed in the fourth quarter of 1999. On an operating basis, fee and other income as a percentage of total revenue, excluding securities transactions, was 48 percent in 2000 and in 1999. Noninterest Expense Divestitures Update Restructuring and Other Charges and Gains Net Charge-offs, Loan Loss Provision and Nonperforming Assets The loan loss provision was $192 million in the fourth quarter of 2000, a decrease of $10 million from the third quarter of 2000 and an increase of $19 million from the fourth quarter a year ago. In 2000, the loan loss provision was $1.1 billion, an increase of $387 million from 1999. The 2000 provision included a $325 million incremental provision. At December 31, 2000, the allowance to net loans increased to 1.39 percent from 1.32 percent at December 31, 1999. At December 31, 2000, nonperforming assets were $1.6 billion, or 1.22 percent of net loans, foreclosed properties and loans held for sale, an increase of $533 million from December 31, 1999. Excluding the single, large problem loan, nonperforming assets increased $320 million. Fourth quarter 2000 nonperforming assets included $334 million of nonperforming assets in the held for sale category, down $15 million from the third quarter. "Our experience in rising nonperforming assets is similar to the rest of the industry at this point in the credit cycle, with a 24 percent increase since September 30. The majority of this increase was related to a large commercial credit to a single borrower. This syndicated credit is an anomaly compared with the rest of the loan portfolio. The next largest nonperforming loan was $33 million," said Rob Nimmo, First Union's chief risk officer. "Excluding the single large nonperforming loan, nonperforming assets – including those held for sale – rose 8 percent from September 30, 2000. We continue to believe that 2001 will be a more challenging economic environment than the previous two years, and for some time we have incorporated into our budgeting process our view that nonperforming assets and loan losses will rise in 2001." Selected Lines of Business
Capital Markets, which encompasses investment banking and corporate banking activities, streamlined and exited a number of businesses in 2000 that did not fit strategic or growth needs. With its major buildup phase essentially complete, the Capital Markets Group developed integrated strategies aimed at serving middle market, growth companies. The impact of the restructuring and a $243 million decline in principal investing gains led to a 30 percent decrease in revenues to $608 million in the fourth quarter of 2000 from the fourth quarter of 1999. Excluding principal investing gains, Capital Markets revenues were down 2 percent from the fourth quarter of 1999. Only modest principal investing gains are anticipated in 2001. The General Bank, which encompasses First Union's commercial, small business and consumer lending and deposit activities, experienced solid growth, with deposit unit sales up 5 percent and Big 3 loans (direct consumer, prime equity lines and small business lines/loans) up 7 percent from the fourth quarter of 1999. Branch divestitures in the fourth quarter of 2000 included $2.1 billion in deposits and $482 million in loans.
In First Union's e-commerce business, enrollments for Internet services grew by approximately 100,000 a month in 2000, reaching 2.4 million enrollments at December 31, 2000, including 59,000 online brokerage enrollments and 88,000 online wholesale enrollments.
Earnings Conference Call 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 Fourth Quarter Earnings Audio Webcast. In order to listen to the webcast, you will need to download Real Player Basic 8 in advance of the event. A replay of the webcast also will be available beginning about noon on Thursday, January 18. Teleconference Instructions: On January 18, the telephone number to participate in the teleconference is 888-603-7029 for U.S. callers (or 712-271-3895 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. A continuous telephone replay will be available beginning at noon on Thursday, January 18, and continuing through 5 p.m. on Wednesday, January 24. The replay telephone number is 402-998-0561. First Union (NYSE:FTU), with $254 billion in assets and stockholders' equity of $15 billion at December 31, 2000, 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 46 states. Online banking products and services can be accessed through www.firstunion.com. This news release and earnings conference call may contain certain forward-looking statements with respect to the goals, plans, objectives, intentions, expectations, financial condition, results of operations, future performance and business of First Union, including, without limitation, (i) statements relating to certain of First Union’s goals and expectations with respect to earnings, 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 (ii) statements preceded by, followed by or that include the words “may”, “could”, “would”, “should”, “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “targets” 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). A discussion of various factors that could cause First Union’s actual results or conditions to differ materially from the goals, plans, objectives, intentions, and expectations expressed in such forward-looking statements is included in First Union’s most recent annual, quarterly and current reports filed with the Securities and Exchange Commission. Some of the factors described in those reports, include, without limitation, factors relating to (1) the strength of the U.S. economy in general and the strength of the local economies in which First Union conducts operations, which 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; (2) 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; (3) adverse conditions in the stock market, the public debt market and other capital markets and the impact of such conditions on First Union’s capital markets and capital management activities; (4) the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); and (5) the effect of corporate restructuring, acquisitions and/or dispositions on First Union. Forward-looking statements speak only as of the date they are made. First Union does not intend to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made. |
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