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October 14, 1999
First Union Reports 3rd Quarter 1999 Earnings Per Share of 84 Cents

First Union reported operating earnings per share of 84 cents in the third quarter of 1999 compared with $1.02 in the third quarter of 1998. Operating earnings were $802 million in the third quarter of 1999 compared with $1.0 billion in the third quarter of 1998. Operating earnings exclude merger-related and restructuring charges. The third quarter of 1999 included no merger-related and restructuring charges. These charges in the third quarter of 1998 were $16 million after-tax.

Third quarter 1999 operating earnings represent a return on average stockholders' equity of 19.91 percent and a return on average assets of 1.39 percent.

In the first nine months of 1999, operating earnings were $2.6 billion, or $2.74 per share, compared with $2.7 billion in the first nine months of 1998, or $2.77 per share. After merger-related and restructuring charges, net income for the first nine months of 1999 was $2.4 billion, or $2.47 per share, compared with $2.0 billion, or $2.08 per share, in the first nine months of 1998.

Nine month 1999 operating earnings represent a return on average stockholders' equity of 21.74 percent and a return on average assets of 1.56 percent.

"Our performance in the third quarter of 1999 was solid and in line with our expectations," said Edward E. Crutchfield, First Union's chairman and chief executive officer. "Our diversified business model continues to produce balanced results. Fee income as a percent of total revenue was 43 percent for the three months and 48 percent for the nine months ended September 30, 1999."

"We're pleased with the robust sales performance in our General Bank," added Ken Thompson, First Union's president-elect. "Sales volume rose significantly in the first nine months of this year compared with the same period a year ago. Sales of our asset management product, the CAP account, through the General Bank increased 45 percent, giving us 562,000 accounts representing $50.4 billion in balances. Other investment product sales in the same time period were also strong, as reflected in a 27 percent increase in fee income related to mutual fund and annuity sales, from $170 million a year ago to $215 million this year. In addition, production in our three key focus areas - direct installment, prime equity and small business loans - rose 51 percent from $7 billion last year to $11 billion this year. The General Bank also was responsible for a major portion of our increase in online retail customers. We've added over 600,000 online customers in the first nine months this year, crossing the 1 million customer threshold on October 1."

First Union Securities (encompassing Capital Markets and Capital Management) generated a 53 percent increase in fee income to $925 million in the third quarter of 1999 compared with $606 million in the third quarter of 1998. This growth was led, in Capital Markets, by improved investment banking results, and in Capital Management, by strong contributions from retail brokerage services and insurance, trust, mutual funds and CAP accounts.

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

A modest increase in net interest income to $1.9 billion. Average loan balances and period-end loan balances declined modestly, largely reflecting loan securitizations.
An 11 percent increase in fee and other income to $1.52 billion, excluding $79 million in portfolio securities losses, compared in the third quarter of 1998 with $1.37 billion, excluding a residential mortgage securitization gain of $117 million related to The Money Store, CoreStates-related branch sales gains of $117 million and portfolio securities gains of $211 million.
Expense growth, excluding merger-related and restructuring charges, of 2 percent to $1.9 billion. Expenses declined 6 percent from the second quarter of 1999. Expense growth for the full year 1999 is expected to be approximately 3 percent.
Continued solid credit quality. Annualized net charge-offs were 0.53 percent of average net loans, compared with 0.55 percent in the year-ago period and 0.53 percent in the second quarter of 1999. Nonperforming assets as a percentage of net loans and foreclosed properties were 0.77 percent in the third quarter of 1999 compared with 0.61 percent in the third quarter of 1998 and 0.70 percent in the second quarter of 1999.

Also in the third quarter of 1999, First Union paid a regular quarterly cash dividend on its common stock of 47 cents per share. The third quarter 1999 dividend payout ratio was 56 percent.

Financial results for the October 1, 1999, purchase accounting acquisition of EVEREN Capital Corporation are not included in the third quarter of 1999. This transaction created the nation's sixth largest retail brokerage with approximately 6,300 registered representatives in 2,700 retail offices in 41 states.

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 September 30, 1999, First Union had assets of $235 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.