Filed by First Union Corporation
Pursuant to Rule 425 under the Securities
Act of 1933 and deemed filed pursuant to
Rule 14a-6(b) under the Securities Exchange
Act of 1934
Subject Company: Wachovia Corporation
Commission File No. 333-59616
Date: July 12, 2001
This filing contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such statements include,
but are not limited to, (i) statements about the benefits of the merger between
First Union Corporation and Wachovia Corporation, including future financial and
operating results, cost savings, enhanced revenues, and accretion to reported
earnings that may be realized from the merger; (ii) statements with respect to
First Union's and Wachovia's plans, objectives, expectations and intentions and
other statements that are not historical facts; and (iii) other statements
identified by words such as "believes", "expects", "anticipates", "estimates",
"intends", "plans", "targets", "projects" and similar expressions. These
statements are based upon the current beliefs and expectations of First Union's
and Wachovia's management and are subject to significant risks and
uncertainties. Actual results may differ from those set forth in the
forward-looking statements.
The following factors, among others, could cause actual results to
differ materially from the anticipated results or other expectations expressed
in the forward-looking statements: (1) the risk that the businesses of First
Union and Wachovia will not be integrated successfully or such integration may
be more difficult, time-consuming or costly than expected; (2) expected revenue
synergies and cost savings from the merger may not be fully realized or realized
within the expected time frame; (3) revenues following the merger may be lower
than expected; (4) deposit attrition, operating costs, customer loss and
business disruption following the merger, including, without limitation,
difficulties in maintaining relationships with employees, may be greater than
expected; (5) the ability to obtain governmental approvals of the merger on the
proposed terms and schedule; (6) the failure of First Union's and Wachovia's
stockholders to approve the merger; (7) competitive pressures among depository
and other financial institutions may increase significantly and have an effect
on pricing, spending, third-party relationships and revenues; (8) the strength
of the United States economy in general and the strength of the local economies
in which the combined company will conduct operations may be different than
expected resulting in, among other things, a
deterioration in credit quality or a reduced demand for credit, including the
resultant effect on the combined company's loan portfolio and allowance for loan
losses; (9) changes in the U.S. and foreign legal and regulatory framework; and
(10) adverse conditions in the stock market, the public debt market and other
capital markets (including changes in interest rate conditions) and the impact
of such conditions on the combined company's capital markets and asset
management activities. Additional factors that could cause First Union's and
Wachovia's results to differ materially from those described in the
forward-looking statements can be found in First Union's and Wachovia's reports
(such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K) filed with the Securities and Exchange Commission and
available at the SEC's Internet site (http://www.sec.gov). All subsequent
written and oral forward-looking statements concerning the proposed transaction
or other matters attributable to First Union or Wachovia or any person acting on
their behalf are expressly qualified in their entirety by the cautionary
statements above. First Union and Wachovia do not undertake any obligation to
update any forward-looking statement to reflect circumstances or events that
occur after the date the forward-looking statements are made.
The proposed transaction will be submitted to First Union's and Wachovia's
stockholders for their consideration. Stockholders are urged to read the
definitive joint proxy statement/prospectus regarding the proposed transaction
and any other relevant documents filed with the SEC, as well as any amendments
or supplements to those documents, because they contain (or will contain)
important information. You will be able to obtain a free copy of the joint proxy
statement/prospectus, as well as other filings containing information about
First Union and Wachovia, at the SEC's Internet site (http://www.sec.gov).
Copies of the joint proxy statement/prospectus and the SEC filings that have
been or will be incorporated by reference in the joint proxy
statement/prospectus can also be obtained, without charge, by directing a
request to First Union, Investor Relations, One First Union Center, Charlotte,
North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations,
100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397).
THE FOLLOWING PRESENTATION MATERIALS MAY BE USED BY FIRST UNION FROM TIME TO
TIME IN MEETINGS WITH INVESTORS, ANALYSTS AND OTHERS
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
THE NEW WACHOVIA
A Compelling Combination
Cautionary Statement
--------------------------------------------------------------------------------
This presentation contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, including, without
limitation, (i) statements about the benefits of the merger between First
Union Corporation and Wachovia Corporation, including future financial and
operating results, cost savings, enhanced revenues, and accretion to reported
earnings that may be realized from the merger; (ii) statements with respect to
First Union's and Wachovia's plans, objectives, expectations and intentions
and other statements that are not historical facts; and (iii) other statements
identified by words such as "believes", "expects", "anticipates", "estimates",
"intends", "plans", "targets", "projects" and similar expressions. These
statements are based upon the current beliefs and expectations of First
Union's and Wachovia's management and are subject to significant risks and
uncertainties. Actual results may differ from those set forth in the
forward-looking statements.
The following factors, among others, could cause actual results to differ
materially from the anticipated results or other expectations expressed in the
forward-looking statements: (1) the risk that the businesses of First Union
and Wachovia will not be integrated successfully or such integration may be
more difficult, time-consuming or costly than expected; (2) expected revenue
synergies and cost savings from the merger may not be fully realized or
realized within the expected time frame; (3) revenues following the merger may
be lower than expected; (4) deposit attrition, operating costs, customer loss
and business disruption following the merger, including, without limitation,
difficulties in maintaining relationships with employees, may be greater than
expected; (5) the ability to obtain governmental approvals of the merger on
the proposed terms and schedule; (6) the failure of First Union's and
Wachovia's stockholders to approve the merger; (7) competitive pressures among
depository and other financial institutions may increase significantly and
have an effect on pricing, spending, third-party relationships and revenues;
(8) the strength of the United States economy in general and the strength of
the local economies in which the combined company will conduct operations may
be different than expected resulting in, among other things, a deterioration
in credit quality or a reduced demand for credit, including the resultant
effect on the combined company's loan portfolio and allowance for loan losses;
(9) changes in the U.S. and foreign legal and regulatory framework; and (10)
adverse conditions in the stock market, the public debt market and other
capital markets (including changes in interest rate conditions) and the impact
of such conditions on the combined company's capital markets and asset
management activities. Additional factors that could cause First Union's and
Wachovia's results to differ materially from those described in the
forward-looking statements can be found in First Union's and Wachovia's
reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K) filed with the Securities and Exchange
Commission and available at the SEC's Internet site (http://www.sec.gov). All
subsequent written and oral forward-looking statements concerning the proposed
transaction or other matters attributable to First Union or Wachovia or any
person acting on their behalf are expressly qualified in their entirety by the
cautionary statements above. First Union and Wachovia do not undertake any
obligation to update any forward-looking statement to reflect circumstances or
events that occur after the date the forward-looking statements are made.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
Additional Information
--------------------------------------------------------------------------------
The proposed transaction will be submitted to First Union's and Wachovia's
stockholders for their consideration. Stockholders are urged to read the
definitive joint proxy statement/prospectus regarding the proposed
transaction and any other relevant documents filed with the SEC, as well as
any amendments or supplements to those documents, because they contain (or
will contain) important information. You will be able to obtain a free copy
of the joint proxy statement/prospectus, as well as other filings containing
information about First Union and Wachovia, at the SEC's Internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus and the
SEC filings that have been or will be incorporated by reference in the joint
proxy statement/prospectus can also be obtained, without charge, by directing
a request to First Union, Investor Relations, One First Union Center,
Charlotte, North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor
Relations, 100 North Main Street, Winston-Salem, North Carolina 27150
(888-492-6397).
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
Agenda
o First Union...We Are Ready - Update on Recent Operating Performance
o First Union/Wachovia Merger Integration Planning...Well Organized and
Progressing
o Wachovia...Clearly Compelling for First Union Shareholders
o First Union...Clearly Compelling for Wachovia Shareholders
o Conclusions
Appendix
o First Union and SunTrust Comparisons
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
First Union...We Are Ready - Update on Recent Operating Performance
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
Strong Financial Performance
o Completed restructuring
o New "best-in-class" transparency of external reporting
o Successfully creating expense management culture
o Significantly improved budgeting and management accountability
o Created stringent investment/acquisition ROIC hurdles: 15% internal, 18%
external
o Building capital levels quarterly with AA rating goal
o Core businesses have performed well in difficult markets
o Met or exceeded analysts' earnings per share expectations four consecutive
quarters
o Q2 2001 operating earnings provides foundation for continued growth
[ARROW] Revenue growth in all three businesses (Q2/Q1); 19% annualized
[ARROW] General bank earnings up 28% 2Q 01/2Q 00
o Result: First Union stock price appreciation of 26% (STI: 3%) for the six
months ended June 30, 2001, ranks 3rd among top 20 banks (STI: 11th), and
debt spreads down vs. peers
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
1
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
Corporate Governance Focus
o New executive team in place
[ARROW] CEO, CFO, CIO, Treasurer, CRO, General Counsel & Head of General
Bank
o Reduced size of Board from 22 to 14 with only one inside director (Ken
Thompson, CEO)
o Designated lead independent director
o All Board committees chaired by independent directors
o Merger integration committee to be created also to be chaired by an
independent director
o Improved alignment of compensation with performance
[ARROW] Eliminated SERPs and RSAs, increased reliance on options,
reduced base salaries, management bonuses only on EPS & EVA growth*,
implemented stock ownership guidelines for senior management
o No "change of control" triggering of employee options
---------------------------------------
* Assumes stockholder approval of Senior Management Incentive Plan at annual
meeting.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
2
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
June 2000 Restructuring - Complete, On Budget and Exceeded Initial Goals
--------------------------------------------------------------------------------
o Credit Cards [ARROW] Portfolio sold to MBNA in Q3 2000 and
converted in Q2 2001
[ARROW] Origination on an agent basis
--------------------------------------------------------------------------------
o Mortgage Servicing [ARROW] Portfolio sold to Wells Fargo in Q3 2000 and
converted in Q1 2001
[ARROW] Production function retained - estimated
2001 production $14 billion
--------------------------------------------------------------------------------
o The Money Store [ARROW] Ceased production - June 2000
[ARROW] Consolidated First Union Home Equity loan
servicing on TMS platform - November 2000
[ARROW] Liquidated $5.3 billion TMS Equity and Home
Improvement loan portfolio (not in original
plan)
[ARROW] At May 31, 2001 First Union held
approximately $70 million in TMS assets -
down from $5.4BN
[ARROW] Performance of loans serviced for others, 20
to 30 percent better than plan
--------------------------------------------------------------------------------
o Non-Core Branches [ARROW] Sold 84 non-strategic retail branch offices
representing $2.7 billion in deposits and
$597 million in loans
o Expense Management [ARROW] Implemented a comprehensive expense eliminate
management policy designed to waste,
redundancy and nonessential expenses.
Budgeted to save $340 million in 2001
--------------------------------------------------------------------------------
o Staffing [ARROW] Reduced headcount in line and staff units
without adversely impacting bottom line
results
[ARROW] Examples
- Reduced fixed income sales and trading
staff by 90 - revenue and net income up
sharply in 2001
- Reduced corporate Human Resources staff
expense by 30 percent - 50 percent of
transactions now performed self service
online - corporate attrition is down
substantially
--------------------------------------------------------------------------------
o Balance Sheet [ARROW] Sold $13 billion of investment securities
Restructuring and long term off-balance sheet contracts
[ARROW] Reduced fixed income trading portfolio by
$5 billion in Q3 2000
[ARROW] Sold $1+ billion performing and nonperforming
commercial loans
--------------------------------------------------------------------------------
o Capital Strength [ARROW] Reduced dividend by 50 percent in December
2000 to strengthen capital base
[ARROW] Published capital ratio target of 2nd
quartile among top 20 U.S. banks
[ARROW] Goal: To regain AA rating
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
3
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
Expense Management - Successfully Reducing Costs Without Impacting Growth
[BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS:]
1Q 2Q 3Q 4Q 1Q 2Q
---------------------------------- -----------------
2000 2001
(9% decline)
$2,387 $2,366 $2,328 $2,132 $2,138 $2,169
----------
Source: First Union 3/31/01 10Q and Company Reports.
o Cost management culture on track
o Savings realized across substantially all categories - while improving
service
o FTE's: 73,000 in June 2000 to 67,420 in June 2001
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
4
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
First Union - Well Diversified Across All Major Financial Services Sectors
[PIE CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS:]
Revenues
(For the quarter ended June 30, 2001)
Corporate and Investment Bank 23%
Other 6%
General Bank 46%
Capital Management 25%
Capital Management Group
o #6 brokerage firm nationally (based on registered reps)
o $172 billion in assets under management
o Presence in 47 states, 7,706 RRs
o $90 billion in mutual funds
o Wealth/trust/401(k)/insurance products and services
General Bank
o #6 bank (based on assets)
o $253 billion in assets
o 7 million retail households
o 800,000 small business clients
Corporate and Investment Bank
o Mid-market focus
o Fully established investment banking business
o Corporate lending
o International trade services
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
5
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
General Bank - Excellent Performance and Trends
$ in Millions 2000 2001
--------------------------- ----------------------
Q2 Q3 Q4 Q1 Q2
------- ------- ------- ------- -------
Revenue $1,412 $1,473 $1,473 $1,453 $ 1,545 o Up 9% 2Q 01/ 2Q 00
Operating Expenses 966 948 992 908 935 o Down 3% 2Q 01/2Q 00
Operating Earnings 268 319 278 295 343 o Up 28% 2Q 01/2Q 00!
Efficiency Ratio (%) 66.83 62.89 65.77 61.19 59.29 o Down by 10% since Q4 2000
Customer Service 6.19 6.22 6.27 6.29 6.32 o Improved 9 consecutive quarters
[ARROW] Almost "best in class" of
6.4 (Source: Gallup Survey)
Customer Attrition (%) 13.8 13.4 13.6 13.0 13.0 o Versus 15% industry estimate
Consumer Loan Production $7,102 $6,921 $7,095 $8,590 $11,212 o Up 58% 2Q 01/2Q 00
Average Core Deposits 97,499 97,186 98,184 98,415 99,424 o Up 2% 2Q 01/2Q 00
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
6
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
Capital Management - Stability In A Challenging Operating Environment
[BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS:]
Capital Management Revenue
Stability in Tough Markets
$ in Millions
1Q 2Q 3Q 4Q 1Q 2Q
---------------------------------- -----------------
2000 2001
Nasdaq all time high
$928 $830 $835 $854 $831 $838
---------------------------------------
Source: First Union publicly available financial segment data, as reported
in First Union's 3/31/01 10-Q and Company Reports.
o Asset gathering powerhouse:
[ARROW] 6th largest broker-dealer
[ARROW] 8th largest U.S. provider to high net worth individuals/families
[ARROW] 4th largest personal trust provider
[ARROW] 23rd largest mutual fund family
[ARROW] 2nd largest bank annuity provider
[ARROW] 8th largest AMA account provider nationally
[ARROW] 16th largest defined contribution services provider
o Proven, multi-channel distribution platform integrates delivery of advice
and products:
[ARROW] 2,162 financial centers
[ARROW] 536 brokerage offices
[ARROW] 7,706 registered representatives
[ARROW] 76 private client offices
[ARROW] FirstUnion.com
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
7
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
Capital Management - Strong Performance Across Segments vs. Peers
[BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS:]
Asset Management Revenue
1Q 2Q 3Q 4Q 1Q 2Q
---------------------------------- -----------------
2000 2001
$151 $146 $156 $153 $145 $139
First Union - 1st Q00 - 1st Q01 (4%)
Franklin Resources (6)
T Rowe Price (11)
Stilwell/Janus (18)
[BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS:]
Wealth/Trust Services Revenue
1Q 2Q 3Q 4Q 1Q 2Q
---------------------------------- -----------------
2000 2001
$185 $185 $185 $187 $179 $184
First Union - 1st Q00 - 1st Q01 (3%)
Franklin Resources (6)
T Rowe Price (11)
Stilwell/Janus (18)
[BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS:]
Retail Brokerage Revenue
1Q 2Q 3Q 4Q 1Q 2Q
---------------------------------- -----------------
2000 2001
$607 $510 $506 $520 $517 $523
First Union - 1st Q00 - 1st Q01 (15%)
Merrill Lynch (24)
AG Edwards (22)
Charles Schwab (34)
---------------------------------------
Source: Company Reports.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
8
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
Capital Management - A History of Growth and Financial Accomplishment
($ in Billions)
1995 2000 CAGR Organic CAGR
---- ---- ---- ------------
Mutual Fund Assets $13 $ 85 46% 24%
Broker Client Assets $10 $205 83% 31%
AMA Assets $12 $121 59% 38%
Assets Under Management $47 $171 29% 19%
Capital Management Revenue $0.4 $3.7 60% 30%
Capital Management Direct $0.2 $1.3 42% 25%
Contribution (a)
---------------------------------------
(a) Pre-tax income including corporate allocations.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
9
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
Corporate & Investment Banking - Growth In A Challenging Operating Environment
Corporate & Investment Banking
Excludes principal investing gains
Growth:
2Q/2Q 21%
1Q 2Q 3Q 4Q 1Q 2Q
---------------------------------- -----------------
2000 2001
$729 $687 $709 $707 $768 $831
o Performed well in a difficult operating environment
o Leveraging commitment to mid-cap growth sector
[ARROW] Comprehensive product offering to serve entire corporate life
cycle
o Strong competitive position in core categories
[ARROW] Fixed Income Sales & Trading
[ARROW] Leveraged Syndication
[ARROW] Public Asset-Backed Securities
[ARROW] Commercial Mortgage-Backed Securities
o Successful expense rationalization
[ARROW] Equity
[ARROW] M&A
[ARROW] Research
---------------------------
Source: Company Reports.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
10
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
Building a Fortress Balance Sheet
[BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS:]
Tier 1 Risk-Based Capital Ratio
6.7% 7.0% 7.0% 7.2% 7.4% 7.7%
------------------------------------------------------------------
Jun 00 Sept 00 Dec 00 Mar 01 June 01 Estimated
Pro Forma
at Closing
[CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS]
5 Year Debt Spreads vs. Peers*
Date Spread Date Spread
---- ------ ---- ------
6/1/00 0.117% 1/16/01 0.200%
6/14/00 0.117% 1/22/01 0.183%
6/23/00 0.203% 1/29/01 0.217%
6/29/00 0.267% 2/5/01 0.217%
7/12/00 0.183% 2/12/01 0.210%
7/24/00 0.167% 2/20/01 0.190%
8/4/00 0.167% 2/26/01 0.177%
8/11/00 0.170% 3/5/01 0.173%
8/29/00 0.200% 3/14/01 0.167%
9/7/00 0.250% 3/19/01 0.170%
9/18/00 0.207% 4/4/01 0.133%
9/26/00 0.190% 4/9/01 0.090%
10/2/00 0.220% 4/17/01 0.060%
10/17/00 0.250% 4/30/01 0.050%
11/21/00 0.333% 5/10/01 -0.007%
11/30/00 0.350% 5/22/01 0.047%
12/4/00 0.383% 5/30/01 0.057%
12/11/00 0.350% 6/11/01 0.050%
12/19/00 0.300% 6/15/01 0.047%
1/2/01 0.267% 6/27/01 0.030%
1/7/01 0.217% 7/9/01 0.043%
---------------------------------------
* Peers include BAC, ONE and WFC.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
11
First Union...We are Ready - Update on Recent Operating Performance
--------------------------------------------------------------------------------
The Market Is Rewarding Our Efforts
Price Performance For The Six Months Ended June 30, 2001
--------------------------------------------------------
[PERFORMANCE GRAPH APPEARS HERE WITH FOLLOWING PLOT POINTS]
DATE FTU PEERS DATE FTU PEERS DATE FTU PEERS
---------- ---- ----- ---------- ---- ----- ---------- ---- -----
12/29/2000 100% 100% 3/7/2001 121% 98% 5/11/2001 108% 92%
1/1/2001 100% 100% 3/8/2001 123% 98% 5/14/2001 110% 93%
1/2/2001 100% 98% 3/9/2001 120% 96% 5/15/2001 110% 94%
1/3/2001 108% 102% 3/12/2001 112% 91% 5/16/2001 112% 96%
1/4/2001 112% 103% 3/13/2001 118% 93% 5/17/2001 112% 96%
1/5/2001 109% 101% 3/14/2001 113% 89% 5/18/2001 112% 96%
1/8/2001 107% 99% 3/15/2001 118% 92% 5/21/2001 111% 96%
1/9/2001 110% 97% 3/16/2001 117% 91% 5/22/2001 114% 98%
1/10/2001 114% 99% 3/19/2001 119% 92% 5/23/2001 113% 98%
1/11/2001 113% 98% 3/20/2001 117% 89% 5/24/2001 114% 98%
1/12/2001 111% 96% 3/21/2001 113% 86% 5/25/2001 114% 97%
1/15/2001 111% 96% 3/22/2001 109% 84% 5/28/2001 114% 97%
1/16/2001 116% 98% 3/23/2001 116% 88% 5/29/2001 114% 97%
1/17/2001 115% 97% 3/26/2001 115% 90% 5/30/2001 114% 97%
1/18/2001 111% 95% 3/27/2001 118% 93% 5/31/2001 116% 98%
1/19/2001 114% 94% 3/28/2001 118% 93% 6/1/2001 116% 98%
1/22/2001 114% 97% 3/29/2001 117% 92% 6/4/2001 117% 99%
1/23/2001 115% 98% 3/30/2001 119% 94% 6/5/2001 119% 99%
1/24/2001 120% 99% 4/2/2001 118% 94% 6/6/2001 120% 98%
1/25/2001 115% 99% 4/3/2001 116% 92% 6/7/2001 121% 98%
1/26/2001 120% 100% 4/4/2001 112% 89% 6/8/2001 119% 96%
1/29/2001 120% 100% 4/5/2001 116% 92% 6/11/2001 119% 96%
1/30/2001 122% 102% 4/6/2001 112% 91% 6/12/2001 119% 95%
1/31/2001 122% 101% 4/9/2001 115% 91% 6/13/2001 119% 95%
2/1/2001 120% 100% 4/10/2001 116% 93% 6/14/2001 117% 93%
2/2/2001 121% 100% 4/11/2001 116% 92% 6/15/2001 117% 93%
2/5/2001 120% 101% 4/12/2001 115% 93% 6/18/2001 120% 93%
2/6/2001 116% 99% 4/13/2001 115% 93% 6/19/2001 121% 94%
2/7/2001 115% 100% 4/16/2001 112% 93% 6/20/2001 121% 95%
2/8/2001 113% 99% 4/17/2001 109% 92% 6/21/2001 124% 98%
2/9/2001 116% 100% 4/18/2001 112% 95% 6/22/2001 122% 97%
2/12/2001 117% 101% 4/19/2001 112% 95% 6/25/2001 124% 95%
2/13/2001 118% 100% 4/20/2001 112% 94% 6/26/2001 123% 95%
2/14/2001 117% 100% 4/23/2001 111% 93% 6/27/2001 122% 95%
2/15/2001 115% 99% 4/24/2001 109% 93% 6/28/2001 125% 96%
2/16/2001 117% 100% 4/25/2001 109% 93% 6/29/2001 126% 96%
2/19/2001 117% 100% 4/26/2001 108% 92%
2/20/2001 115% 97% 4/27/2001 109% 94%
2/21/2001 113% 95% 4/30/2001 108% 93%
2/22/2001 111% 95% 5/1/2001 108% 93%
2/23/2001 114% 95% 5/2/2001 107% 94%
2/26/2001 117% 97% 5/3/2001 107% 94%
2/27/2001 119% 98% 5/4/2001 107% 95%
2/28/2001 116% 97% 5/7/2001 107% 94%
3/1/2001 118% 97% 5/8/2001 107% 93%
3/2/2001 117% 98% 5/9/2001 108% 93%
3/5/2001 117% 96% 5/10/2001 109% 93%
3/6/2001 118% 96%
First Union
--------------------------------------------------------------------------------
S&P Bank Index
---------------------------------------------------------------
1/1/01 1/31/01 3/2/01 4/1/01 5/1/01 5/31/01 6/30/01
--------------------------------------------------------------------------------
-----------------------------------------
Top 20 Banks
-----------------------------------------
BAC +30.9%
SOTR +27.8
-----------------------------------------
FTU +25.6
-----------------------------------------
WB +22.4
ASO +21.2
RGBK +17.2
MTB +11.0
NCC +7.1
MI +6.0
FBF +5.0
STI +2.8
FITB +0.5
BBT -1.6
USB -2.0
ONE -2.3
CMA -3.0
-----------------------------------------
S&P Bank Index -3.9
-----------------------------------------
KEY -7.0
MEL -8.9
PNC -10.0
WFC -16.6
-----------------------------------------
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
12
--------------------------------------------------------------------------------
First Union/Wachovia Merger Integration Planning...Well
Organized and Progressing
--------------------------------------------------------------------------------
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
First Union/Wachovia Merger Integration Planning...Well Organized and
Progressing
--------------------------------------------------------------------------------
First Union's Extensive Integration Experience
----------------------------------------------
o 81 bank mergers since 1985 (approximately 4,000 branches, 2,000 systems)
[ARROW] 27 bank mergers with greater than $1 billion in assets; 13 bank
mergers with greater than $5 billion in assets
[ARROW] 10 broker-dealer/investment manager acquisitions with greater
than 3 million customers
o We have learned from our CoreStates experience
--------------------------------------------------------------------------------
30 of Those 81
Complex Bank
41 of Those 81 Acquisitions
Less Complex Involved
----------------
Bank Acquisitions Mutual Funds
Involved Brokerage
-----------------
81 Acquisitions Deposits ATM Personal Trust 10 Specialty Acquisitions
Involved Consumer Loans Corporate Trust Involved
----------------- ---------------------------
General Ledger Leasing Insurance Unique System
Payroll Indirect IRA Conversions
Accounts Payable Unsecured/Secured CAP Examples Include:
Fixed Assets Commercial Loans International Equity Derivative
Benefits CDs Sales Tracking Systems
Network Connectivity Safe Deposit Box Credit/Debit Cards Bond Systems
Customer Information Overdraft Protection Capital Markets Investments Commercial and
Systems Mortgage Capital Mgmt Investments Insurance Systems
Item Processing Trading Dot coms
Credit Card Account Recovery
Wire Transfer Cash Management
Equity Lines 401K
ACH Institutional Custody
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
13
First Union/Wachovia Merger Integration Planning...Well Organized and
Progressing
--------------------------------------------------------------------------------
Balanced Representation of Wachovia and First Union Management
----------------------------------------------
Executive Committee (B. Baker and K. Thompson)
Approve key transition decisions
------------ ----------------------------------------------
Post-Closing
Committee of Merger Steering Committee (B. McCoy and D. Carroll)
Independent Set overall policies
Directors ---------------------------------------------------
------------
Project Management Office
Coordinate and oversee all transition processes and communications
----------------------------------------------------------------------
Customer Experience Team Integrated Communications
Culture Integration Team Progress Tracking
--------------------------------------------------------------------------------
Transition Team
Manage the corporation's integration Conversion Task Force
planning at the business unit level Planning for all systems conversions
------------------------------------ ------------------------------------
All Business Units Represented All Business Units Represented
--------------------------------------------------------------------------------
Primary Objectives: Expand Customer Base
Stay Focused on Customer Experience
Improve Customer Perception of Combined Organization
--------------------------------------------------------------------------------
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
14
First Union/Wachovia Merger Integration Planning...Well Organized and
Progressing
--------------------------------------------------------------------------------
Transition Risk Management
o Risk management is key component of entire transition/execution process:
[ARROW] Customer risk [ARROW] Employee risk [ARROW] Market risk
[ARROW] Systems/operations risk [ARROW] Regulatory risk [ARROW] Capacity/volume risk
[ARROW] Organization risk [ARROW] Financial risk [ARROW] Transaction risk
Detailed Information Tracked
----------------------------------------- -------------------------------------------------------------------
Financial Retail Customer
----------------------------------------- -------------------------------------------------------------------
Core Expense/Goal Net Growth vs. Baseline Commercial vs. Target
One-Time Expense/Goal Customer Market Share vs. Target
Operating Exp/Op. Rev. vs. Goal Small Business Brand Perception vs. Target
Operating EPS/Forecast vs. Goal Consumer (Gallup) vs. Target Customer Perception vs. Target
Cash EPS/Forecast vs. Goal -------------------------------------------------------------------
ChargeOffs/Avg. Loans vs. Target Human Resources
NPL/Loans + OREO vs. Target -------------------------------------------------------------------
Avg. Deposits/Customer vs. Baseline
Avg. Loans/Customer vs. Baseline Cultural Task Force % Employees Retained/Plan
Revenue Growth/Forecast Meeting Milestones % Displaced in New Positions/Plan
Tier I Capital vs. Target FTE Reduction/Plan Monthly Turnover/Plan
Total Capital vs. Target Training Events/Plan
Debt Rating vs. Target
Reserves/Loans vs. Target ---------------------------------------------------------------------
Credit Losses/Avg. Loans vs. Target Transition Plan Milestones
Noncredit Losses/Avg. Loans vs. Target ---------------------------------------------------------------------
Share Price Movement/BK Index vs. Target % Milestones Completed vs. Schedule Data Accuracy vs. Target
Economic Profit Growth vs. Target Call Center Service Level Level of Exceptions vs. Target
Operating ROE vs. Target Metrics vs. Target
Share Repurchases vs. Target System Uptime vs. Target
----------------------------------------- ---------------------------------------------------------------------
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
15
--------------------------------------------------------------------------------
Wachovia...Clearly Compelling For First Union
Shareholders
--------------------------------------------------------------------------------
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
Wachovia...Clearly Compelling for First Union Shareholders
--------------------------------------------------------------------------------
Strategic Proposition
------------------------------------------------------
Regional Ruler with Scale National Businesses
------------------------------------------------------
o "Best of both" executive teams and boards - strengthens quality of both
o Improves our business lines:
Impact
--------
[ARROW] Retail Bank Strength - #1 on East Coast
- Distribution (FTU sales, WB service culture) Improved
- Market share (WB's 3.5 million customers) Improved
[ARROW] Brokerage and Wealth Management - National Scale
- Product cross-sell opportunities (FTU's Improved
brokerage, annuities, mutual funds, etc)
- Distribution (FTU: 2 RRs/branch, WB: 0.3) Improved
[ARROW] Corporate/Investment Bank Scale - Stronger Mid-Market Focus
- Client mix (WB's customer base and coverage) Improved
- Cross-sell opportunities (FTU's I-Bank Improved
products to WB clients, WB cash management)
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
16
Wachovia...Clearly Compelling for First Union Shareholders
--------------------------------------------------------------------------------
Financial Proposition
o Significant earnings accretion with conservative assumptions
EPS Impact
--------------------
Cash New GAAP (a)
----- ------------
2002E 3.7% 0.0%
2003E 5.3 2.5
2004E 7.1 5.4
o 20%+ internal rate of return, well in excess of 12% cost of capital
o Strong balance sheet - improves capital and reserve coverage ratios
Estimated
Current First Pro Forma
Union At Closing
------------- ----------
Reserves/Loans 1.4% 1.8%(b)
Tier I
Capital/Risk-Based Assets 7.4% 7.7%
o Positioned to generate over $2.5 billion in excess capital per year
[ARROW] After-tax cost savings expected to contribute $550 million per
annum
[ARROW] Potential revenue synergies in excess of $200 million already
identified and not included in analysis
---------------------------------------
(a) As used herein, "New GAAP" refers to the recently adopted modifications to
GAAP whereby existing and newly recorded goodwill would not be subject to
amortization, but rather would be subject to periodic testing for
impairment.
(b) Includes an illustrative $450 million enhancement to reserves, although the
amount of any actual enhancement will be determined at closing.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
17
Wachovia...Clearly Compelling for First Union Shareholders
--------------------------------------------------------------------------------
Reasonable and Appropriately Paced Merger Planning
"The cost savings potential in a First Union/Wachovia combination is greater
than in a SunTrust/Wachovia combination...The greater cost savings are possible
in a First Union/Wachovia combination largely because the branch overlap is
greater." Thomas K. Brown, Second Curve Capital, June 4, 2001
"Management appears to be highly conscientious of minimizing risk in this
integration. To this end, the company [First Union] is intent on understanding
and smoothly integrating the businesses they are merging with and staying
focused on customer satisfaction. Merger transition teams, comprised of
employees from both First Union and Wachovia, are well along in the process of
conducting transition due diligence and developing an integration strategy. The
two companies appear to be leaving no stone unturned." George A. Bicher,
Deutsche Banc Alex. Brown Inc., June 14, 2001
"First Union is well advanced in planning the merger integration with
Wachovia...We are very impressed by the approach the new company is taking,
which is very customer-oriented. This includes not closing any branches for a
year after the merger closes, communicating with customers, and most important
paying attention to branch capacity." Ronald I. Mandle, Sanford C. Bernstein
Inc., June 28, 2001
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
18
--------------------------------------------------------------------------------
First Union...Clearly Compelling for Wachovia
Shareholders
--------------------------------------------------------------------------------
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
First Union...Clearly Compelling for Wachovia Shareholders
--------------------------------------------------------------------------------
First Union/Wachovia - a Superior Franchise - Particularly in High Growth Areas
First Union/ SunTrust/ Scale
Wachovia Wachovia Advantage
General Banking
---------------
Customers (mm) 19 8 2.4x
On-line Banking Customers 3 1 3.0x
(mm)
Branches 2,900 1,800 1.6x
ATMs 5,128 3,347 1.5x
Combined Assets ($ bn) $ 329 $ 179 1.8x
Combined Deposits ($ bn) $ 186 $ 108 1.7x
Pro Forma Tier 1 Capital $ 21 $ 12 1.8x
($bn)(1)
States of Operations 13 9 1.4x
Metropolitan Areas 75 58 1.3x
Wealth Management
-----------------
Assets Under Management
($ bn) $ 222 $ 142 1.6x
Mutual Funds ($ bn) $ 98 $ 31* 3.2x
Brokerage Offices 600 75* 8.0x
Registered Representatives 8,350 674* 12.4x
High Net Worth Offices 133 57 2.3x
Corporate & Investment Banking Mid-Market Requires More
------------------------------ Scale Investment
---------------------------------------
*Needs further acquisitions to be viable.
(1) Estimated pro forma Tier 1 Capital at closing.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
19
First Union...Clearly Compelling for Wachovia Shareholders
--------------------------------------------------------------------------------
First Union/Wachovia Business Mix Produces Far Superior Growth Potential
o First Union: We believe our franchise has a higher growth business mix
o SunTrust: Traditional retail bank and real estate/corporate lender
Net Income Contribution
-----------------------------------
First Union/ SunTrust/
Wachovia Wachovia (b)
Long-term ------------------ ------------
Growth Rate 3-5 Year
Business Segment of Business (a) 2001E Normalized
---------------- --------------------- ----------
Retail 8% 46% 35%-40% 66%
Brokerage/Wealth Management 15 21 30-35 11
Corporate/Investment Bank & Other 10 33 25-30 23
Implied Long-Term Growth (c) 10% 11%+ <9%
---------------------------------------
(a) First Union 5 year growth estimates by business line.
(b) Estimated as per March 31, 2001 10Q financial statements.
(c) Based on net income contribution and First Union growth estimates by
business line.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
20
First Union...Clearly Compelling for Wachovia Shareholders
--------------------------------------------------------------------------------
Integration Risks Far Lower With First Union
First Union SunTrust
o Nature of Proposal o Friendly Merger o Hostile acquisition
--------------------------------------------------------------------------------
o Transaction Type o 100% in-market o 50% out-of-market
--------------------------------------------------------------------------------
o Size Risk (WB Assets/Partner o Low: 30% o High: 73%
Assets)
--------------------------------------------------------------------------------
o # of Bank/Broker Acquisitions o 91 o 6
Since 1985
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
21
First Union...Clearly Compelling for Wachovia Shareholders
--------------------------------------------------------------------------------
Financial Summary
First Union
First Union SunTrust Advantage
o EPS Impact on Wachovia - 2004E
"New GAAP" 17% 3% [CHECK MARK]
Cash 20 9 [CHECK MARK]
o Internal Rate of Return to Wachovia 21%+ 15%-17% [CHECK MARK]
o Pro Forma Annual Dividend to Wachovia (page 25) $2.40 $2.40
o Implied or Stated Long-term Growth Rate (page 33) 10-12%+ 7% [CHECK MARK]
o Currency Valuation(a) (page 33)
Price/2002 Cash EPS 10.6x 12.0x [CHECK MARK]
2002 Cash P/E Ratio to Estimated Earnings Growth 97% 171% [CHECK MARK]
o Combined Capital Position
Tier I Risk-Based Capital Ratio (page 26-29) 7.7%, 37th* 6.5%, 50th* [CHECK MARK]
Projected Dividend Payout Ratio (New GAAP Basis) 35%, 32nd* 47%, 46th* [CHECK MARK]
(page 30)
Projected Dividend & Repurchases/ Cash Income 35% 70% [CHECK MARK]
Incremental Capital Breakeven (# of years) (page 28) 3 13 [CHECK MARK]
Net Excess Capital Generated Annually ($bn) (page $2.3 $0.3 [CHECK MARK]
27)
Premium as of July 6 (page 24) 1.0%
---------------------------------------
* of top 50 banks.
(a) Based on prices as of July 6, 2001.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
22
--------------------------------------------------------------------------------
Conclusions
--------------------------------------------------------------------------------
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
Conclusions
--------------------------------------------------------------------------------
-----------
A Clearly
[FIRST UNION + [WACHOVIA = Compelling
LOGO APPEARS HERE] LOGO APPEARS HERE] Combination
-----------
First Union: The Right Partner
------------------------------
In our opinion:
o Strong growth in core businesses
o Higher growth mix of business
o Corporate governance focus
o Transparent financial reporting
o Shareholder friendly compensation structure
o Stringent acquisition hurdles
o Undervalued stock
o Friendly deal
o Extensive merger/systems integration experience
o Recent performance being rewarded by equity and debt investors
First Union/Wachovia: The Right Combination
-------------------------------------------
o Scale franchise with high growth business mix
o Far less integration risk
o Enhanced capital strength via excess capital generation
o Substantially greater earnings accretion
o Higher internal rate of return
o Financially superior for Wachovia shareholders, by all measures . . .with
same dividend
o . . . And compelling for First Union shareholders
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
23
--------------------------------------------------------------------------------
Appendix
--------------------------------------------------------------------------------
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
Treatment of First Union's One-Time Payment to Wachovia
--------------------------------------------------------------------------------
o First Union's dividend alternatives for Wachovia's shareholders need to be
factored in when comparing First Union's negotiated proposal with SunTrust's
hostile offer
o First Union's Proposal Offers Wachovia's Shareholders:
2 First Union Shares of Common Stock $ 67.56
One-Time Cash Payment 0.48 (a)
--------------
Total Value Received $ 68.04
o SunTrust's Proposal:
1.081 SunTrust Shares of Common Stock $ 68.70
One-Time Cash Payment --
--------------
Total Value Received $ 68.70
Premium of SunTrust Implied Offer/First Union Implied Offer: 1%
---------------------------------------
Note: Prices as of July 6, 2001.
(a) Assuming the Wachovia shareholder elects to receive the one-time $0.48
payment instead of dividend equalization preferred shares. The current First
Union annual dividend per share of common stock is $0.96 ($1.92 pro forma
annually for one share of Wachovia common stock at the 2-for-1 exchange
ratio).
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
24
Dividend Alternatives Are Economically Equivalent For First Union
--------------------------------------------------------------------------------
Illustrative Example
Key Assumptions
---------------
o First Union/Wachovia to target cash basis dividend payout ratio of less
than 33%
o Common stock dividend to be increased as enhanced earnings realized
o Illustrative example assumes $1.20 per share dividend ($2.40 pro forma per
current Wachovia share based on 2-for-1 exchange ratio) reached by third
quarter 2003
o Incremental dividend cash flows present valued based on a 13% discount
rate
Hypothetical Dividend
---------------------------
Per New New Wachovia Cash Basis
Period Wachovia Per Preferred Projected Cash Dividend
------ Common Share Share (a) EPS Payout Ratio
------------ ------------- -------------- ------------
2001 4th Qtr $0.24 $ 0.06 --
2002 1st Qtr 0.24 0.06 --
2nd Qtr 0.26 0.04 --
3rd Qtr 0.26 0.04 --
4th Qtr 0.28 0.02 $ 3.28 31.7%
2003 1st Qtr 0.28 0.02 --
2nd Qtr 0.28 0.02 --
3rd Qtr 0.30 -- --
4th Qtr 0.30 -- $ 3.67 31.6%
Net Present Value $ 0.24
Adjusted for 2:1 $ 0.48
Exchange
---------------------------------------
(a) A Wachovia shareholder electing to receive the dividend equalization
preferred shares will not also receive the $0.48 cash payment. Each dividend
equalization preferred share pays a dividend of $0.30 less the common
dividend paid per share.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
25
First Union/Wachovia Should Produce Significantly Higher Capital Ratios
--------------------------------------------------------------------------------
Illustrative Example
($ in billions) First Union/ SunTrust/
Wachovia Wachovia
------------ ------------
Current Tier I Equity $14.5 $6.8
Earnings to Close Less Share Buybacks 1.0 0.4
Wachovia - Other Tier I (Trust 0.9 0.9
Capital Securities, etc.)
Equity Issued In Transaction (a) 12.5 12.7
New Intangibles (8.5) (9.2)
------------ ------------
Pro Forma Tier I Capital $20.4 $11.6
--------------------------------------------------------------------
Tier I Risk-Based Capital Ratio 7.7% 6.5%
--------------------------------------------------------------------
Memo: Calculation of New Intangibles
------------------------------------
Wachovia Common Equity $6.9 $6.9
Earnings to Close Less Share Buybacks (0.2) (0.2)
Wachovia Intangibles (1.5) (1.5)
After-Tax Restructuring Charge (1.2) (1.7)
------------ ------------
Adjusted Tangible Common Equity $4.0 $3.5
Transaction Value (a) 12.5 12.7
------------ ------------
New Intangibles $8.5 $9.2
---------------------------------------
(a) Assumes 185 million shares outstanding at close and stock prices as of
July 6, 2001.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
26
First Union/Wachovia Should Generate Significantly More Excess Capital
--------------------------------------------------------------------------------
Illustrative Example
2002E
----------------------------------------------
($ in billions) First Union/ SunTrust/
Wachovia Wachovia
------------ -----------
Capital Generated By:
---------------------
Pro Forma Net Income (Estimated) $3.9 $2.2
Efficiencies 0.3 0.1
Core Deposit Amortization 0.3 0.3
------------ -----------
Cash Earnings $4.5 $2.6
Capital Utilized For:
---------------------
Pro Forma Dividends ($1.5) ($1.1)
Share Repurchases (0.1) (0.7)
Fund Assumed 6% Loan Growth (0.7) (0.5)
------------ -----------
Net Excess Capital Generated (a) $2.3 $0.3
Dividends & Repurchases As a % 35% 70%
of Cash Earnings
Net Excess Capital As a % of 51% 11%
Cash Earnings
Risk-Based Capital Growth Per Annum (b) 0.82% 0.17%
---------------------------------------
(a) First Union/Wachovia and SunTrust/Wachovia net excess capital generated
would total $2.5 billion and $0.5 billion annually, respectively, if full
efficiencies are assumed.
(b) Represents net excess capital as a percentage of risk-based assets.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
27
First Union/Wachovia Should Generate Incremental Capital At A Quicker Pace
--------------------------------------------------------------------------------
($ in billions) First Union/ SunTrust/
Wachovia Wachovia
------------ -----------
After-Tax Cash Restructuring Charges $0.90 $0.65
Break-Up Fee -- 0.78
------------ -----------
Total Up-Front Charges (a) $0.90 $1.43
Projected Fully-Realized After-Tax Cost $0.55 $0.31
Savings
Less: Common Stock Dividend Increase (b) -- (0.19)
------------ -----------
Annual Incremental Capital $0.55 $0.12
Up-Front Charges/Incremental Capital 1.6x 12.0x
Years Before Incremental Capital Offsets 3 13
Up-Front Charges
---------------------------------------
(a) Excludes $450 million reserve addition for both companies.
(b) Run-rate: 2004 and beyond.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
28
Top 50 U.S. Banks: Tier 1 Risk-Based Capital Ratio
--------------------------------------------------------------------------------
Tier 1 Risk Based Tier 1 Risk Based
Capital Ratio(a) Capital Ratio(a)
----------------- -----------------
1) Investors Financial Services 15.80 % 27) J.P. Morgan Chase & Co. 8.70 %
2) Mercantile Bankshares 15.76 28) PNC Financial Services Group, Inc. 8.70
3) State Street Corporation 13.30 29) Citigroup, Inc. 8.56
4) Fifth Third Bancorp 13.03 30) Union Planters Corporation 8.55
5) North Fork 12.89 31) Bank of New York Company, Inc. 8.42
6) Pacific Century Financial 12.84 32) Compass Bancshares, Inc. 8.15
7) First Virginia Banks 12.58 33) FleetBoston Financial Corporation 7.96
8) Commerce Bancshares 12.23 34) Regions Financial Corporation 7.93
9) Valley National Bancorp 11.75 35) Bank One Corporation 7.80
10) Synovus Financial Corp. 11.67 36) Wachovia Corporation 7.80
11) Commerce Bancorp, Inc. 10.90 37) Wilmington Trust Corporation 7.74
12) Popular, Inc. 10.63 -------------------------------------------
13) UnionBanCal Corporation 10.49 First Union/Wachovia 7.70
14) Centura Banks, Inc. 10.30 -------------------------------------------
15) National Commerce Financial Corp. 10.29 38) AmSouth Bancorporation 7.69
16) Banknorth Group, Inc. 10.27 39) Bank of America Corporation 7.65
17) Northern Trust Corporation 10.10 40) KeyCorp 7.54
18) Marshall & Ilsley Corporation 10.08 41) SouthTrust Corporation 7.53
19) TCF Financial Corporation 10.04 42) Comerica Incorporated 7.46
20) Hibernia Corporation 9.96 43) M & T Bank Corporation 7.41
21) Associated Banc-Corp 9.69 44) U.S. Bancorp 7.40
22) BB&T Corporation 9.20 45) Wells Fargo 7.30
23) FirstMerit Corporation 9.14 46) Huntington Bancshares 7.20
24) BancWest Corporation 9.10 47) First Union 7.16
25) Zions Bancorporation 9.05 48) National City 7.04
26) First Tennessee National 8.72 49) SunTrust Banks 6.85
Corporation 50) Mellon Financial 6.71
-------------------------------------------
Sun Trust/Wachovia 6.50
-------------------------------------------
---------------------------------------
(a) As of March 31, 2001, except National Commerce data as of December 31, 2000.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
29
Top 50 U.S. Banks: Dividend Payout Ratio
--------------------------------------------------------------------------------
2002E Dividend 2002E Dividend
Payout Ratio (a) Payout Ratio (a)
----------------- -----------------
1) Investors Financial Services Corp. 4.0 % 27) TCF Financial Corporation 32.7 %
2) State Street Corporation 15.9 28) Commerce Bancorp, Inc. 32.8
3) Citigroup, Inc. 16.1 29) Centura Banks, Inc. 33.8
4) M&T Bank Corporation 18.1 30) Mellon Financial Corporation 34.1
5) Commerce Bancshares, Inc. 19.4 31) U.S. Bancorp 34.1
6) Zions Bancorporation 19.5 32) Mercantile Bankshares Corporation 34.4
7) Northern Trust Corporation 23.2 ---------------------------------------------------
8) Banknorth Group, Inc. 24.6 First Union/Wachovia 34.9
9) Wells Fargo & Company 26.3 ---------------------------------------------------
10) Bank One Corporation 27.5 33) PNC Financial Services Group, Inc. 36.0
11) Bank of New York Company, Inc. 27.6 34) North Fork Bancorporation, Inc. 37.1
12) Fifth Third Bancorp 27.9 35) First Tennessee National Corporation 37.4
13) Marshall & Ilsley Corporation 28.1 36) Bank of America Corporation 37.8
14) UnionBanCal Corporation 28.1 37) Compass Bancshares, Inc. 38.1
15) J.P. Morgan Chase & Co. 30.0 38) First Virginia Bank, Inc. 41.4
16) SunTrust Banks, Inc. 30.1 39) Synovus Financial Corp. 41.4
17) First Union Corporation 30.3 40) Associated Banc-Corp 42.0
18) Popular, Inc. 30.5 41) Regions Financial Corporation 42.1
19) South Trust Corporation 30.5 42) First Merit Corporation 42.4
20) National Commerce Financial Corp. 30.6 43) Wachovia Corp. 42.6
21) BancWest Corporation 31.0 44) Wilmington Trust Corporation 43.3
22) Hibernia Corporation 31.5 45) KeyCorp 44.0
23) BB&T Corporation 31.9 46) National City Corporation 44.4
24) FleetBoston Financial Corporation 31.9 ---------------------------------------------------
25) Comerica Incorporated 32.2 SunTrust/Wachovia 46.6
26) Pacific Century Financial 32.3 ---------------------------------------------------
Corporation 47) AmSouth Bancorporation 50.9
48) Union Planters Corporation 51.6
49) Valley National Bancorp 51.8
50) Huntington Bancshares Incorporated 56.7
---------------------------------------
(a) New GAAP basis. Earnings estimates based on First Call, adjusted for current
intangible amortization per share run rate for each institution.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
30
First Union/Wachovia: Significantly More Compelling Financially For Shareholders
--------------------------------------------------------------------------------
o We believe that the marginal accretion and low returns to SunTrust's
shareholders generated by this transaction limit SunTrust's financial
flexibility
[ARROW]Cost savings assumptions are 25%-30% above the comfort levels SunTrust
discussed with Wachovia in December
[ARROW]In our view, aggressive given limited overlap - under 25% overlap of
branches but cost savings total 10% of combined costs
[ARROW]Revenue opportunities limited by lack of investment management product
breadth
[ARROW]Low organic earnings growth requires significant share repurchases to
approach 10% EPS growth
SunTrust EPS Impact New GAAP Basis Cash Basis
------------------- -------------- ----------
2002E (10%) 0%
2003E (4%) 3
2004E (1%) 6
o IRR to SunTrust 12%-14%, at the low end of recently announced transactions
o We believe it is unlikely that SunTrust can acquire Wachovia after a
protracted hostile battle and experience NO customer and revenue attrition
---------------------------------------
Source: SunTrust investor presentation on May 14, 2001. EPS impact and IRR
assume $780 million option payment.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
31
First Union/Wachovia: Significantly More Compelling Financially For Shareholders
--------------------------------------------------------------------------------
SunTrust's Lack of Growth Track Record (a)
SunTrust CAGR
2Q'00 - 2Q'01:
--------------
Net Revenue 5%
Operating Earnings 2%
Core Earnings Per Share 5%
Avg. Fully Diluted Shares (4%)
Memo:
-----
Asset Management Revenues (9%)
Note: excludes one-time gains
o Core earnings have not grown in the past two years
o EPS growth has been driven by one-time gains and share repurchases (15%
buyback of stock over the last 2 years - almost twice that of the second
highest banking organization buyback)
o "Growth" businesses are stagnating
-------------------------------------------------------------
We believe that SunTrust's earnings momentum has hit the wall
-------------------------------------------------------------
---------------------------------------
(a) Comparison based on the six months ended June 30, 2001 and June 30, 2000.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
32
First Union Is Still Undervalued Despite Excellent Progress
--------------------------------------------------------------------------------
o We believe that First Union has one of the best business mixes and long-term
growth potential among U.S. banks - especially vs. SunTrust
First Union Sun Trust
--------------------- ----------------
Earnings Contribution
Business Segment Normalized 3-5 Years
---------------------
Retail 35% - 40%
Brokerage/Wealth 30% - 35%
Management
Corporate/Investment Bank 25% - 30%
& Other
--------------------------------------------------------------------------------
Implied Long-Term Growth Rate 10% - 12%+ vs. 7%
--------------------------------------------------------------------------------
o But First Union shares currently trade at the low end of our peer group (a)
First Union Price/Estimated 2002 Cash EPS 10.6x 12.0x
Peer Group Average 12.2x 12.2x
--------------------------------------------------------------------------------
P/E Rank Among Top 20 Banks 15th 9th
--------------------------------------------------------------------------------
P/E Ratio to Estimated Earnings Growth 97%(b) 171%
Peer Group Average "PEG" 119% 119%
--------------------------------------------------------------------------------
PEG Ratio Rank Among Top 20 Banks 18th 1st
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
First Union: 23% Potential Upside by Simply Trading at Peer Averages
-SunTrust Appears Overvalued
--------------------------------------------------------------------------------
---------------------------------------
(a) Peer group includes top 20 U.S. banks, excluding Trust and Money Center
banks. Earnings per share estimates from First Call, adjusted for current
intangible amortization per share. Peer group average PEG ratio assumes
First Call estimated 5 year earnings per share growth as denominator.
(b) Based on 11% earnings growth, midpoint of 10%-12% implied long-term growth
rate range.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
33
Deal Protection in $2+ Billion Transactions
--------------------------------------------------------------------------------
o Break up fee is lower in the new Wachovia than that used in other large
transactions
Break Up Fee Break Up Fee/Deal Value
----------------------- --------------------------
Assumed 17% Assumed 17%
Buyer/Target Deal Value At Market Premium Offer At Market Premium Offer
------------------------------------ ------------ ---------- ------------- ----------- --------------
First Union Corp./ Signet Banking Corp. $3,323 $193 $303 5.82% 9.11%
----------------------------------------------------------------------------------------------------------------------
SunTrust Banks Inc./ Crestar Financial Corp. 9,606 470 789 4.90% 8.22%
----------------------------------------------------------------------------------------------------------------------
AmSouth Bancorp./ First American Corp. 6,341 301 510 4.74% 8.05%
Fifth Third Bancorp/ CNB Bancshares Inc. 2,328 116 186 4.97% 7.99%
Royal Bank of Canada/ Centura Banks Inc. 2,330 103 181 4.42% 7.77%
Firstar Corp./ Mercantile Bancorp. 10,670 463 816 4.34% 7.65%
Charles Schwab Corp./ U.S. Trust Corp. 2,619 115 196 4.38% 7.49%
Star Banc Corporation/ Firstar Holdings Corporation* 7,357 300 515 4.08% 7.01%
Fleet Financial Group/ Shawmut National Corporation * 3,697 133 256 3.60% 6.94%
BankBoston Corp./ BayBanks, Inc. 2,047 74 142 3.59% 6.92%
Wachovia Corp./ Central Fidelity Banks Inc. 2,303 82 158 3.56% 6.84%
National City Corp./ Integra Financial Corp. 2,112 74 144 3.50% 6.81%
First American Corp./ Deposit Guaranty Corp. 2,693 95 183 3.52% 6.81%
First Union Corp./ CoreStates Financial Corp . 17,104 510 1,078 2.98% 6.30%
Bank One Corp./ First Commerce Corporation 3,061 64 181 2.10% 5.90%
CoreStates Financial Corp./ Meridian Bancorp, Inc. 3,193 96 188 3.01% 5.90%
PNC Financial Services Group/ Midlantic Corporation 3,043 74 172 2.43% 5.64%
Wells Fargo & Co./ First Security Corp. 2,778 100 155 3.60% 5.58%
Fleet Financial Group/ BankBoston Corp .* 16,258 560 889 3.44% 5.47%
Deutsche Bank AG/ Bankers Trust Corp. 9,426 350 500 3.71% 5.30%
FleetBoston Financial Corp./ Summit Bancorp 6,991 210 350 3.00% 5.01%
Norwest Corporation/ Wells Fargo & Company* 34,611 1,200 1,732 3.47% 5.00%
Regions Financial Corp./ First Commercial Corp. 2,705 74 130 2.72% 4.81%
----------------------------------------------------------------------------------------------------------------------(1)
First Union Corp./ Wachovia Corp .* 13,627 375 640 2.75% 4.70%
----------------------------------------------------------------------------------------------------------------------
First Union Corp./ First Fidelity Bancorporation 5,555 83 254 1.49% 4.58%
Bank One Corp./ First Chicago NBD Corp.* 29,482 345 1,317 1.17% 4.47%
Chemical Banking Corp/ Chase Manhattan Corp.* 11,358 161 494 1.42% 4.34%
Union Planters Corp./ Magna Group Inc. 2,239 26 94 1.15% 4.18%
Fifth Third Bancorp/ Old Kent Financial Corp. 4,962 200 200 4.03% 4.03%
Chase Manhattan Corp./ J.P. Morgan & Co.* 34,423 1,250 1,250 3.63% 3.63%
First Bank System Inc./ U.S. Bancorp 9,086 300 300 3.30% 3.30%
NationsBank Corp./ BankAmerica Corporation* 66,624 0 1,997 0.00% 3.00%
Firstar Corp./ U.S. Bancorp* 21,237 630 630 2.97% 2.97%
Washington Mutual Inc./ H.F. Ahmanson & Co. 9,907 275 275 2.78% 2.78%
NationsBank Corp./ Barnett Banks Inc. 15,523 400 400 2.58% 2.58%
NationsBank Corp./ Boatmen's Bancshares Inc. 9,750 250 250 2.56% 2.56%
All Transactions with Deal Values>$2BN Median 3.46% 5.52%
All Mergers of Equals with Deal Values>$2BN: Median 2.86% 4.58%
---------------------------------------
* Mergers of equals.
(1) 5.72% break up fee as a percent of deal value assuming $780 million
maximum break up fee.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
34
First Union/Wachovia: Significantly More Compelling Financially For Shareholders
--------------------------------------------------------------------------------
o Hostile deals in the U.S. banking industry have a poor history
[ARROW] No "successful" completed hostile deal in more than a decade
[ARROW] Only completed transaction - Wells Fargo/First Interstate
-Substantial customer disruption and deposit run-off, particularly
in non-California, non-overlap markets
-Substantial attrition of acquired senior management
-Significant earnings shortfall
---------------------------------------------------- ---------------------------------------------------------------
Wells Fargo Experience Similarities in WFC and STI Proposals
---------------------------------------------------- ---------------------------------------------------------------
Deposit Run-off: Total (a) 16% WFC STI
Deal Nature Hostile Hostile
Deposit Run-off: Non-California (a) 35% # of $1B+ Asset Integrations 1 1
in Previous 10 Years
% of Top 50 First Interstate
Management Choosing to Remain 0% Acquired Assets as a % of 105% 73%
Current Assets
Earnings Shortfall (b) 30%+
% of Acquired Deposits Out 57% 51%
of Footprint (c)
---------------------------------------------------- ---------------------------------------------------------------
---------------------------------------------------------------
If STI's Experience Is Similar, We Believe The Implications For
Shareholders Will Be Disastrous
---------------------------------------------------------------
---------------------------------------
(a) Data represents % change for deposits from closing through 6/98, two years
after closing.
(b) Reported income for 1997 and 1998 as compared to Wells Fargo estimates at
time of merger.
(c) Represents % of non-California deposits for First Interstate and North and
South Carolina deposits for Wachovia.
[FIRST UNION LOGO APPEARS HERE] [WACHOVIA LOGO APPEARS HERE]
35