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FIRST UNION ON FITCHALERT NEGATIVE, DOMINION POSITIVE -- FITCH FINANCIAL WIRE --

 FIRST UNION ON FITCHALERT NEGATIVE, DOMINION POSITIVE
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Sept. 22 /PRNewswire/ -- First Union Corp.'s 'A' senior debt rating is placed on FitchAlert with negative implications following its announcement of an agreement to acquire Dominion Bankshares Corp. First Union National Bank's 'A+\F-1+' structured transaction rating is also on FitchAlert negative. The 'BBB-' rating on Dominion's senior debentures is placed on FitchAlert with positive implications.
 The proposed acquisition should enhance First Union's position in the increasingly competitive southeast banking markets. However, Dominion's high level of non-performers and the continued weakness of the real estate markets in its operating region will present a significant challenge to management.
 Based on current data, the transaction would create the ninth largest domestic banking company with $61 billion in assets. First Union's trade territory, which currently reaches from Florida to North Carolina, will be expanded north to Maryland and into middle-Tennessee. In addition, Dominion's trust and mortgage servicing operations will enhance First Union's already strong earnings contributions from non- interest sources.
 First Union's first half 1992 earnings translated into a 1.00 percent return on assets (ROA), up 21 basis points (bps) from the same period last year, due to a wider net interest margin, smaller loan loss provisions, and roughly 50 percent increases in both trust revenues and deposit service charges. The company's non-performing assets (NPA) ratio, adjusted to include accruing loans past due 90 days or more, declined to 3.58 percent at midyear 1992, down from its 4.74 percent peak a year earlier.
 The risk profile of the combined loan portfolio rises only moderately, despite Dominion's significantly weaker credit quality, underscoring the size differential between the two companies. On a pro- forma combined basis, First Union's NPA ratio would have been 3.99 percent at mid-year 1992, an increase of only 41 bps, although reserve coverage of non-performers and 90-day delinquencies would have continued to be somewhat low, at only 58 percent. Nonetheless, the combined entity's equity-to-asset and Tier 1 ratios would have been strong at 7.2 percent and 8.6 percent, respectively.
 Dominion's 1991 operating results were significantly impacted by deteriorating asset quality throughout its mid-Atlantic operating region, and its resulting ROA was an anemic 21 bps. During the first half of this year, the company continued to experience credit-related problems. Excluding $15.5 million in gains from marking a portion of its securities portfolio to market, Dominion would have reported a $10 million loss for the second quarter. A $28 million loss in the year's first period (excluding $13 million in mark-to-market losses) included provisions of $50 million for loan losses and $15 million for the liquidation of 22 foreclosed properties with a combined carrying value of $26 million in the Washington, D.C./northern Virginia area.
 While asset quality measurements in Dominion's Richmond, Roanoke, and Nashville markets improved during the second quarter, the Washington, D.C. area and northern Virginia suburbs continued to show no signs of recovery. Furthermore, non-accruals in southeastern Virginia rose 54 percent to $65 million during the three-month period. As a result, consolidated non-performers, including accruing loans past due more than 90 days, declined only $36 million to $367 million, or 6.35 percent of total loans and foreclosed properties, despite $48 million in net chargeoffs taken during the period.
 Fitch will continue to review the effects of the transaction on the combined entity's asset quality, liquidity, and capital adequacy.
 -0- 9/22/92
 /CONTACT: Scott O'Donnell, 212-908-0531, or Christopher M. Siedman, 212-908-0524, both of Fitch/
 (DTU DMBK) CO: First Union Corp.; Dominion Banksahres Corp. ST: North Carolina, Virginia IN: FIN SU: RTG


CK -- NY053 -- 2175 09/22/92 12:11 EDT
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Date:Sep 22, 1992
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