Cautionary Statement
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This presentation contains certain estimates and projections regarding each of
First Union Corporation, CoreStates Financial Corp and the combined company
following the merger, including estimates and projections relating to cost
savings, enhanced revenues and accretion to illustrative earnings that may be
realized from the merger, and certain restructuring charges expected to be
incurred in connection with the merger. These estimates and projections
constitute forward-looking statements (within the meaning of the Private
Securities Litigation Reform Act of 1995), which involve significant risks and
uncertainties. Actual results may differ materially from the results discussed
in these forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in First Union Corporation's
Current Report of Form 8K, dated November 18, 1997, as filed with the Securities
and Exchange Commission, to which report reference is hereby made.
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FIRST UNION CoreStates exhibit 1
Transaction Rationale
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o Financially Attractive
oo Accretive in 1999
oo Meets 18 month test
o Strategically Compelling
oo Leading position in Mid-Atlantic
o In-Market Deal
oo Low-risk transaction
oo Wealthy, desirable market
oo Demonstrated ability to integrate quickly
o Business Leverage
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FIRST UNION CoreStates exhibit 2 Transaction Rationale
Terms of Transaction
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Fixed Exchange Ratio 1.62 First Union shares for each
CoreStates share
Indicated Purchase Price
Per Share $83.84
Indicated Total Price $16.6 Billion
Accounting Method Pooling of interests
First Union Shares Issued(1) 320.1 million, representing 33% pro forma
CoreStates ownership
Expected Closing End of April 1998
Expected Conversion Beginning of November 1998
(1) Excludes issuance of an estimated 4.9 million shares required to qualify
transaction for pooling-of-interest accounting treatment.
Based on closing prices as of November 14, 1997.
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FIRST UNION CoreStates exhibit 3 Transaction Terms
Favorable Transaction for First Union
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Premium to Market 18%
Price to Book Value 5.3x
- --------------------------------------------------------------------------------
First CoreStates Comparable
Union Transaction Acquisitions(1)
----- ----------- ---------------
Multiple to:
- ------------
1998 Estimated Earnings(2) 13.2x 19.8x(2) 19.5x
1998 Estimated Earnings(3) 11.5x(3) 11.4x
Adjusted for Synergies
- --------------------------------------------------------------------------------
(1) Comparable acquisitions represent 3 bank transactions with deal values over
$3 billion announced since January 1997. (Excludes transactions involving
First Union.)
(2) Based on First Call consensus estimates as of November 14, 1997. Such
estimates are used for illustrative purposes only and are not intended to
be projections.
(3) Includes run-rate synergies. Excludes pre-tax and post-tax restructuring
charges of $1,195 million and $795 million, respectively, or $.81 per
share, and pre-tax and post-tax gains on deposit divestitures of $70
million and $44 million, respectively, or $.04 per share expected to be
taken in 2nd quarter of 1998.
Note: Closing prices as of November 14, 1997.
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FIRST UNION CoreStates exhibit 4 Transaction Terms
Opportunity for Higher Performance
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CoreStates + FTU
1997 Pro Forma(1)
- --------------------------------------------------------------------------------
ROE 20.66%
EPS Growth 11%
ROA 1.50%
Overhead Efficiency Ratio 54.90%
Fee Income/Revenue 34.6%
Tier 1 Leverage 6.87%
NCO/Average Loans(2) 66bps
(1) Includes only First Union and CoreStates results for nine months ended
9/30/97 and excludes restructuring charges.
(2) Annualized rate.
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FIRST UNION CoreStates exhibit 5 Higher Perfomance
Strategically Compelling:
Why First Union?
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o First Union's technology leadership
o Strength of retail products and systems
o Accelerates Capital Markets capabilities
o Compatible values and vision for customers, employees and communities
o Value for our shareholders
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FIRST UNION CoreStates exhibit 6 Why First Union
Strategically Compelling:
The Power of the Combined Franchise
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o No. 1 deposit share in Pennsylvania and New Jersey
o 33% market share in Philadelphia, 4th largest MSA
o Per capita income 12% higher than national average
September 30, 1997 (pro forma)* | Map of PA, NJ, DE
Assets: $74.6 billion | [GRAPHIC OMITTED]
Loans: $53.1 billion |
Deposits: $53 billion |
Branches: 1,100 |
ATMs 1,380 | o CoreStates Branches
| oo First Union Branches
* Includes Pennsylvania, New Jersey and Delaware region prior to
divestitures.
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FIRST UNION CoreStates exhibit 7 Powerful Combination
Strategically Compelling:
Regional Banking
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o #1 Consumer lender in region
oo 37% Market share
oo 50% Household penetration
o #1 SBA lender
o 25% Small business market penetration
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FIRST UNION CoreStates exhibit 8 Regional Banking
Strategically Compelling:
Global and Specialized Banking
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o #1 Middle Market and Commercial Bank
o 32% Market Share
o Leader in Specialized Industries
o National Leader in Cash Management
o Congress Financial Corporation
o International
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[LOGO]
FIRST UNION CoreStates exhibit 9 Global and Specialized Banking
Strategically Compelling:
Congress Financial
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o Strong Financial Performer
oo 3% ROA
oo 20% CAGR in earnings since 1987
o Conservative credit culture
oo .66% Net Charge-Offs (1987-1996)
o Over $3 Billion in managed assets
o 12 offices in North America and London
o 90% of customers outside of region
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[LOGO]
FIRST UNION CoreStates exhibit 10 Congress Financial
Strategically Compelling:
International
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o Represented in 23 countries
o Cash Management, Trade Finance, Foreign Exchange
o 1,200 banking relationships in 80 countries
o Leadership positions
oo L/Cs
oo International check processing
oo Correspondent bank balances
oo EXIM Bank programs
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[LOGO]
FIRST UNION CoreStates exhibit 11 International
Strategically Compelling:
Superior Financial Performance (1)(2)
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[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
ROE
Rank Year Percent
---- ---- -------
5 1995 19.4%
5 1996 20.1%
1 1997 23.3%
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
ROA
Rank Year Percent
---- ---- -------
5 1995 1.6%
3 1996 1.8%
4 1997 1.8%
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
NIM
Rank Year Percent
---- ---- -------
3 1995 5.5%
4 1996 5.5%
4 1997 5.3%
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Efficiency Ratio
Rank Year Percent
---- ---- -------
5 1995 57.8%
4 1996 54.4%
5 1997 53.0%
(1) 1997 data annualized for nine months ended 9/30/97. Such annualized data are
not intended to be projections for the full year.
(2) Ranking among the 25 largest banks as defined by SNL, excluding
non-recurring items. 1995 rankings treat CoreStates as if it were among the 25
largest banks at that time.
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FIRST UNION CoreStates exhibit 12 Financial Performance
Financially Attractive
Accretive to Earnings
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1998 1999
- --------------------------------------------------------------------------------
$mm EPS $mm EPS
--- --- --- ---
1 First Union(1) $2,558 $3.91 $2,891 $4.34
2 CoreStates(1) 859 4.23 953 4.65
Estimated After-tax Adjustments
- -------------------------------
3 Expense Efficiencies $258 .26 $459 .46
4 Revenue Enhancements 58 .06 89 .09
5 Earnings on Excess Capital(2) 44 .04 78 .08
6 Divestitures (15) (.01) (15) (.01)
------ ----- ------ -----
7 Total Adjustments $345 .35 $611 .62
------ ----- ------ -----
8 Total Earnings
on Combined Shares(3) $3,762 $3.82 $4,455 $4.46
------ ------
9 Accretion to Earnings per share ($.09) $.12
10 Total Cash Earnings on Combined
Shares(3) $4,133 $4.20 $4,826 $4.83
11 Leverage Ratio 7.48% 8.15%
(1) 1998 First Union and CoreStates earnings per share are based on First Call
consensus estimates and exclude restructuring charges. 1999 earnings per
share are not First Call estimates. Such earnings are based on First
Union's 1998 First Call consensus earnings per share plus 11% and
CoreStates's 1998 First Call consensus earnings per share plus 10%. Such
earnings estimates are presented for illustrative purposes only and are not
intended to be projections.
(2) Based on CoreStates's capital in excess of a 6% leverage ratio.
(3) Assumes 985 million shares outstanding in 1998 and 999 million shares
outstanding in 1999.
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FIRST UNION CoreStates exhibit 13 Financial Benefits
Financially Attractive:
Significant Synergy Opportunities
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o Projected expense efficiencies of $723 million (pre-tax)
oo 45% of CoreStates 1997 annualized expenses
oo Synergies fully phased in by 1999
o Projected fee revenue enhancements of $194 million
oo 21% of CoreStates 1997 annualized fee revenues
oo Synergies begin immediately
o Increase CoreStates fees/revenue ratio to First Union level
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FIRST UNION CoreStates exhibit 14 Synergies
Financially Attractive:
Estimated Expense Reductions
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($ Millions) 1998 1999
- --------------------------------------------------------------------------------
Banking Units $208 $370
Staff and Other 103 184
Automation & Operations 95 169
---- ----
Total Pre-Tax Expense Efficiencies $406 $723
% CoreStates Controllable Expense Base* 26% 45%
Total After-Tax Expense Efficiencies $258 $459
*Excludes intangible amortization, Trust Preferred expense and other
non-controllable expenses.
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FIRST UNION CoreStates exhibit 15 Expense Efficiencies
Financially Attractive:
Significant Branch Overlap
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o 55% of CoreStates Branches are within 2 miles of a First Union Branch
- --------------------------------------------------------------------------------
[MAP OF PENNSYLVANIA, NEW JERSEY AND DELAWARE SHOWING THE
BRANCHES OF CORESTATES AND FIRST UNION]
- --------------------------------------------------------------------------------
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FIRST UNION CoreStates exhibit 16 Branch Overlap
Estimated Merger
Restructuring Charges
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($ millions)
- --------------------------------------------------------------------------------
Severance and Relocation $305
Contracts and Fixed Assets $255
Real Estate Consolidations $200
Systems Conversions $200
Charitable Support $100
Other $135
------
Total Pre-Tax Charges $1,195
Total After-Tax Charges $795
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FIRST UNION CoreStates exhibit 17 Restructuring Charges
Financially Attractive:
Estimated Revenue Opportunities
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($ Millions) 1998 1999
- --------------------------------------------------------------------------------
Capital Markets $90 $130
Capital Management 18 45
Other 15 19
---- ----
Total Revenue Enhancements $123 $194
Revenue Enhancements
After taxes and expenses $58 $89
Fee Income/Total Revenue 31% 34%
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[LOGO]
FIRST UNION CoreStates exhibit 18 Revenue
First Union
Integration Expertise
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All Acquisitions since 1993 FFB
- --------------------------------------------------------------------------------
Assets ($ Millions) $66,000 $35,000
- --------------------------------------------------------------------------------
Cost Savings 45% 18%
- --------------------------------------------------------------------------------
Months to Integration 2.7 6
Acquisitions 21
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FIRST UNION CoreStates exhibit 19 Integration Expertise
Exceeded Goals at First Fidelity
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% Actual
Goals Results vs. Goal
($ in Millions)
Revenue Enhancements(1) $79 $89 +13%
Expense Efficiencies(1) $106 $125 +18%
---- ----
Total $185 $214
==== ====
(1) Pre-tax results based on internal management reporting for 1996.
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FIRST UNION CoreStates exhibit 20 First Fidelity
Business Leverage:
Commercial Banking & Capital Markets
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- ---------------------------------- ----------------------------------------
CoreStates First Union
- ---------------------------------- ----------------------------------------
o Strong middle market & small o Full range of FTU/Wheat Capital
business banking relationships Markets services available
o Strong specialized industry o Strong specialized industry groups
groups and Wheat First research focus
o Well-developed International o Broad FTU customer base can
operations leverage off CoreStates network
o Nationally ranked Cash o #4 in Cash Management focused
Management focused on large on middle market. Top 5 ranking
corporate market in information reporting via PC
and Internet
o Congress Financial asset-based o Extends current asset-based
leader product offerings to textile and
furniture customer base
- ---------------------------------- ----------------------------------------
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FIRST UNION CoreStates exhibit 21 Business Leverage
Business Leverage:
Consumer Banking & Capital Management
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- ---------------------------------- ----------------------------------------
CoreStates First Union
- ---------------------------------- ----------------------------------------
o Strong home equity originator, o Increase FTU national ranking to #2
leader in region
o #1 consumer bank in region, 50% o Powerful CMG products and
household penetration services
o Large corporate and personal o CMG products and services, money
trust business management opportunities, etc.
o $33 billion managed, $285 o Adds to assets under management,
billion administered 8th largest
- ---------------------------------- ----------------------------------------
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[LOGO]
FIRST UNION CoreStates exhibit 22 Business Leverage
Business Leverage:
Advanced Technology
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- --------------------------------------------------------------------------------
First Union
- --------------------------------------------------------------------------------
o Single systems platform, year 2000 prepared
o Powerful marketing technology (SOLD, Einstein, Data Warehouse)
o Direct (telephone) Banking
o PC Banking
- --------------------------------------------------------------------------------
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FIRST UNION CoreStates exhibit 23 Business Leverage
Conclusion
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o Financially Attractive
o Strategically Compelling
o In-Market Deal
o Business Leverage
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[LOGO]
FIRST UNION CoreStates exhibit 24 Conclusion
First Union and CoreStates:
The Power of the Combined Franchise
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------------------------------
September 30, 1997(1) Map of Eastern United States
[GRAPHIC OMITTED]
Assets: $204 billion New Haven, CT
Loans: $137 billion Bergen-Passaic Counties, NJ
Deposits: $133 billion Middlesex County, NJ
Equity: $15 billion Harrisburg, PA
Baltimore, MD
#1 in deposits on East Coast Roanoke, VA
Columbus, GA
Nationally Ranked: Tampa, FL
#1 small-business banking Fort Meyers, FL
#2 home equity lending Miami, FL
#3 cash management Scranton-Wilkes Barre, PA
Top 5 middle-market lending Reading, PA
#16 provider of mutual funds(2) Newark, NJ
#2 2,766 branches Monmouth-Ocean, NJ
#5 3,570 ATMs Trenton, NJ
Leadership position in specialized banking, Allentown, PA
commercial leasing, Philadelphia, PA
international, asset-based finance Washington, D.C.
Richmond-Petersburg, VA
Norfolk, VA
Greensboro, NC
Charlotte, NC
Augusta-Aiken, GA
Jacksonville, FL
Daytona Beach, FL
Orlando, FL
West Palm Beach, FL
Fort Lauderdale, FL
No. 1, 2 or 3 ranking in
21 of the 30 largest MSAs
on the East Coast
------------------------------
(1) Pro forma, including the pending Signet, Covenant and Wheat First
acquisitions
(2) Also includes conversion of $7.1 billion of common trust assets.
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FIRST UNION CoreStates exhibit 25 Powerful Combination
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[LOGO]
FIRST UNION
Map of Eastern United States
[GRAPHIC OMITTED]
NY
PA
CT
NJ A Powerful
MD Combination!
DC
DE
VA
TN
NC
SC
GA
FL
[LOGO]
CoreStates
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FIRST UNION CoreStates exhibit 26
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[LOGO]
FIRST UNION
Supplemental Information
[LOGO]
CoreStates
- --------------------------------------------------------------------------------
Dividend Growth
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[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Current Dividend Annualized
In Dollars
Year Dollars
- ---- -------
1978 .15
1979 .16
1980 .17
1981 .18
1982 .20
1983 .23
1984 .25
1985 .29
1986 .33
1987 .39
1988 .43
1989 .50
1990 .54
1991 .56
1992 .64
1993 .75
1994 .86
1995 .98
1996 1.10
Current 1.28
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FIRST UNION CoreStates 1
Growth in Fee Income
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1996 vs. 1995 YTD 97 vs. YTD 96
- ------------------------------------ ------------------------------------
Wells Fargo 84.34%* First Union 37.16%
Norwest 37.97% ------------------------------------
Bankers Trust 36.60%+ Barnett 31.87%*
J.P. Morgan 31.74%+ NationsBank 30.28%*
First Union 25.65% PNC Bank 28.74%
- ------------------------------------ Wells Fargo 21.79%*
Bank of New York 20.84% Bankers Trust 20.99%+
Banc One 19.99%* Republic New York 18.97%
NationsBank 18.45%* Mellon 17.76%
Fleet Financial 18.38%* KeyCorp 17.35%
Mellon Bank Corp 16.71% Norwest 15.48%
First Bank System 15.66% Suntrust 14.96%
Wachovia 13.86% CoreStates 14.93%
Data from SNL Securities and corporate earnings releases.
Excludes securities gains and losses and unusual or nonrecurring gains and
losses.
* Growth rate substantially affected by accounting treatment of acquisitions.
+ Significant growth in trading income.
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FIRST UNION CoreStates 2
Asset Quality: Average Net Charge-Offs
1987 - 1996
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1. 0.54 Suntrust 13. 1.01 Banc One
2. 0.56 First Union 14. 1.16 Fleet Financial
- --------------------------------------- 15. 1.16 Wells Fargo
3. 0.56 Wachovia 16. 1.17 Bank of Boston
4. 0.63 KeyCorp 17. 1.00 First Bank System
5. 0.67 Barnett Banks 18. 1.20 Norwest
6. 0.68 Republic New York 19. 1.45 First Chicago
7. 0.73 National City Corp. 20. 1.46 Bank of New York
8. 0.81 Nationsbank 21. 1.46 Chase Manhattan
9. 0.83 J.P. Morgan 22. 1.49 Mellon Bank Corp
10. 0.84 PNC Bank 23. 1.55 Citicorp
11. 0.98 BankAmerica 24. 1.78 Bankers Trust
12. 1.00 Corestates
Originally reported data. 1995 data reflects 1/1/96 merger with First Fidelity.
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FIRST UNION CoreStates 3
First Union: Productivity and Profitability
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1990 1993 1996 YTD 97
- --------------------------------------------------------------------------------
Overhead
Efficiency* 60.8% 57.8 54.1 52.0
ROA 0.79% 1.20 1.31 1.41
ROE 12.5% 17.4 18.9 19.8
* Overhead efficiency excluding OREO and intangibles amortization. Overhead
efficiency, ROA and ROE before SAIF and merger-related charges.
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FIRST UNION CoreStates 4
First Union and CoreStates Markets:
Over 36% of Nation's Gross State Product
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[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
New Jersey 3.7%
Pennsylvania 4.5%
Delaware 0.4%
New York 8.3%
Florida 4.5%
North Carolina 2.7%
Virginia 2.6%
Georgia 2.6%
Maryland 1.9%
Tennessee 1.8%
Connecticut 1.7%
South Carolina 1.2%
Washington, D.C. 0.7%
Source: U.S. Statistical Abstract 1996.
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FIRST UNION CoreStates 5
Concentration of Companies with
Annual Sales $20 MM - 250 MM+
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Together, the First Union footprint accounts for over 36% of the
total national middle-market companies.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL]
New Jersey 4.2%
Pennsylvania 5.0%
Delaware 0.4%
New York 8.4%
Florida 4.6%
Georgia 2.8%
North Carolina 2.4%
Virginia 2.2%
Tennessee 1.9%
Connecticut 1.8%
Maryland 1.7%
South Carolina 1.0%
Washington, D.C. 0.4%
Source: Dun & Bradstreet
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FIRST UNION CoreStates 6
New Corporate Facilities and Expansions
1994-1996
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[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL]
First Union States 6,651
East North Central 5,626
West North Central 2,787
East South Central 2,165
Pacific 1,064
West South Central 920
Mountain 889
New England 290
First Union States: DC, DE, FL, GA, MD, NC, SC, VA, NJ, NY, PA.
Excludes TN.
Source: Site Selection Magazine, February 1997
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FIRST UNION CoreStates 7