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Contact: Virginia Mackin
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Investor Contact: Alice Lehman
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July 14, 1999
First Union Reports 2nd Quarter 1999 Earnings of 90 Cents Per Share

First Union's earnings per share were 90 cents in the second quarter of 1999, including an 8 cent per share after-tax gain on the sale of assets associated with its factoring business. Excluding this one-time gain, earnings per share amounted to 82 cents. Earnings of 90 cents compare with operating earnings of 92 cents in the second quarter of 1998. Operating earnings exclude merger-related and restructuring charges.

Earnings were $873 million in the second quarter of 1999 compared with operating earnings of $883 million in the second quarter of 1998. The second quarter of 1999 included no merger-related and restructuring charges. These charges in the second quarter of 1998 amounted to $634 million after-tax.

For the first six months of 1999, operating earnings were $1.8 billion, or $1.90 per share, compared with $1.7 billion in the first six months of 1998, or $1.75 per share. Operating earnings per share were $1.70 in the first six months of 1999, excluding previously announced nonrecurring gains of 20 cents per share related to the sale of First Union's interest in Electronic Payment Services, Inc., and the sale of the factoring assets. After merger-related and restructuring charges, net income for the first six months of 1999 was $1.6 billion, or $1.63 per share, compared with $1.0 billion, or $1.07 per share, for the first six months of 1998.

Second quarter 1999 earnings represent a return on average stockholders' equity of 21.25 percent and a return on average assets of 1.56 percent.

"Second quarter 1999 results were in line with our expectations," said Edward E.Crutchfield, First Union's chairman and chief executive officer. "We are encouraged by the sales results throughout the company, especially product sales in our financial service centers. Our Future Bank retail delivery system has been fully implemented and it is delivering significantly increased retail product sales. We continue to focus a great deal of energy on strategically repositioning our company for the future."

Capital Management fee income increased to $520 million in the second quarter of 1999 from $448 million in the second quarter of 1998, led by strong contributions from retail brokerage services, insurance and CAP accounts, First Union's asset management product. The Capital Management Group had $164 billion in assets under management, including $75 billion in First Union-advised mutual funds, at June 30, 1999. Capital Markets fee income was $363 million in the second quarter of 1999 compared with $380 million in the second quarter of 1998. The decline was primarily the result of lower venture gains on equity investments.

Key factors in the second quarter of 1999 compared with the second quarter of 1998 included:

A 13 percent increase in fee and other income to $1.7 billion, excluding portfolio securities transactions. Growth was led by strong results in Capital Management and income from loan securitizations.
A modest increase in net interest income and average loan balances. Period-end loan balances declined modestly, largely reflecting the securitization and retention as securities available for sale of $6.7 billion in prime equity lines to facilitate funding flexibility.
Expenses remained on target to limit full year 1999 expense growth to approximately 3 percent. In the second quarter of 1999 compared with the second quarter of 1998, expense growth was only 1 percent adjusted for expenses related to the purchase accounting acquisition of The Money Store on June 30, 1998. Expenses related to personnel declined compared with the first quarter of 1999, reflecting a restructuring plan announced in mid-March.
Continued strength in credit quality. Nonperforming assets as a percentage of net loans and foreclosed properties were 0.70 percent in the second quarter of 1999 compared with 0.66 percent in the second quarter of 1998 and 0.71 percent in the first quarter of 1999. Annualized net charge-offs were 0.53 percent of average net loans, compared with 0.47 percent in the year-ago period and 0.49 percent in the first quarter of 1999.

First Union (NYSE:FTU) is a leading provider of financial services to more than 16 million customers throughout the East Coast and the nation. At June 30, 1999, First Union had assets of $230 billion and total stockholders' equity of $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 1999 filings with the SEC.