First Union Corp. estimated on Thursday that it would earn $110 million to $116 million in the second quarter, slightly exceeding analysis' estimates.

The Charlotte-base company also announced it had agreed to acquire South Carolina Federal Corp., parent of the state's third-largest thrift, for about $79.7 million.

Acquiring the $917 million asset thrift company will raise First Union's deposit share in the Palmetto State to third place, from fifth.

First Union's stock rallied on the positive earnings prediction, rising 75 cents to close at $37.50. The company is scheduled to release its full results around July 10.

Expenses Under Control

First Union, with $48 billion in assets, attributed its better-than-expected results to improved credit quality, a strong net interest margin, and tight expense controls.

First Union's per-share estimate of 84 cents to 88 cents exceeded Wall Street's consensus estimate of 82 cents a share.

The company earned 61 cents a share in the second quarter of 1991, when it did not benefit from the government-assisted acquisition of Southeast Banking Corp., Miami. First Union acquired Southeast last September.

Barbara Massa, First Union's senior vice president, corporate communications, said secondquarter loan-loss reserve and chargeoffs would be lower than the first quarter, when it took an $83 million provision and $68.8 million in chargeoffs.

The net interest margin in the second quarter will be higher than the first quarter's 4.66%, she said.

"This is not based on one-time gains of any sort," Ms. Massa said. "This is a core earnings outlook."

The company holds about $8 billion in certificates of deposit that will be repriced at lower rates throughout the year. Ms. Massa said First Union estimates that the book rate of these CDs is about 60 basis points higher than the expected repricing.

Consumer Lending Up

Loan growth was relatively flat in the second quarter, although consumer lending showed record levels in April and May, Ms. Massa said. Fee income "will be nice and healthy but I'm not sure where it will come out vis-a-vis the first quarter," she added.

Mortgage refinancing helped boost First Union's noninterest income to a record level of $220.6 million in the first quarter, but that refinancing has abated with rising interest rates.

First Union agreed to buy South Carolina Federal Corp., the parent of South Carolina Federal Savings Bank, in a stock swap valued at $79.7 million, or 1.45 times the thrift's book value, based on the Thursday afternoon price of First Union.

"It's a positive for First Union because there should be some cost savings associated with the acquisition," said Kathryn Bissette, banking analyst with Sterne, Agee & Leach Inc. in Atlanta.

South Carolina Federal had announced on May 18 that it was seeking a buyer and had retained the Atlanta-based brokerage firm Robinson-Humphrey Co. as an adviser.

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