EX-99.A 2 dex99a.htm THE EARNINGS NEWS RELEASE The Earnings News Release

Exhibit (99)(a)

LOGO

 

LOGO    Press Release April 14, 2008

WACHOVIA REPORTS 1ST QUARTER RESULTS; ANNOUNCES INITIATIVES

TO FURTHER ENHANCE CAPITAL BASE AND FLEXIBILITY

— Plans to Raise Capital through Public Offering

— Reduces Quarterly Dividend to $0.375 Per Common Share, Preserving $2.0 Billion of

Capital Annually

— Increases Credit Reserves; Provision $2.1 Billion Above Net Charge-offs

— Net Loss of $350 Million or $393 Million (20 Cents) after Preferred Dividend

— Strong Sales Momentum and Solid Underlying Expense Control Cushions Impact of

Rising Credit Costs and Market Disruption Losses

 


CHARLOTTE, N.C. – Wachovia today announced a series of actions to further enhance its capital base and operational flexibility, and updated its credit reserve modeling to reflect greater emphasis on forecasted changes in customer behavior assuming continued house price depreciation. These actions include:

 

 

Plans to raise capital through a public offering of common stock and perpetual convertible preferred stock;

 

 

Lowering the quarterly common stock dividend, which preserves $2.0 billion of capital annually, to build capital ratios and provide more operational flexibility. The board of directors declared a quarterly common stock dividend of $0.375 cents per common share, payable on June 16, 2008, to stockholders of record on May 30, 2008. This dividend level is consistent with Wachovia’s capital needs and growth opportunities for each of its business segments, and with an anticipated 40 percent to 50 percent cash payout ratio over the intermediate horizon; and

 

 

The update in the credit reserve modeling in response to the current and forecasted market environment and its effect on consumer behavior, particularly in stressed markets, resulting in a significant increase in the first quarter 2008 provision for credit losses. In addition, the scope of credit disclosures was increased to provide enhanced insight into the payment option consumer real estate portfolio.

In addition, Wachovia reported a first quarter 2008 net loss of $350 million before preferred dividends, or a net loss available to common stockholders of $393 million, (20 cents per common share). These results, which reflect higher credit costs and the continued disruption in the capital markets, compared with earnings of $2.30 billion, or $1.20 per share, in the first quarter of 2007.

While solid underlying performance was overshadowed by market disruption-related valuation losses of $2.0 billion, Wachovia generated total revenue of $7.9 billion on higher loans and deposits and strength in fiduciary and asset management fees, brokerage commissions and traditional banking fees, including the impact of the A.G. Edwards acquisition.

“I’m deeply disappointed with our first quarter results, but I am confident we’re taking prudent and appropriate actions in this challenging period to restore Wachovia to a more profitable path. The precipitous decline in housing market conditions and unprecedented changes in consumer behavior prompted us to update our credit reserve modeling and rely less heavily on historical trends to forecast losses. As a result, we have substantially increased our reserves,” said Ken Thompson, Wachovia’s chief executive officer. “The most painful decision was to reduce the dividend because it adversely affects our shareholders. But we believe the long-term benefit to

 

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WACHOVIA REPORTS 1ST QUARTER RESULTS; ANNOUNCES CAPITAL INITIATIVES/page 2

 

shareholder value outweighs the disadvantage of the dividend reduction as we fortify our balance sheet against continued instability in the housing and capital markets.

“It’s important to note that in early 2007 in advance of the market dislocation, we took steps to bolster our liquidity and reduce market-related exposures in products originally intended for distribution,” Thompson added. “We have generally been a provider of liquidity to the market during this period of market disruption, and we also continue to reduce our market-related exposures. The actions we announced today will further enhance and ensure our ongoing financial flexibility to invest and drive future earnings growth. With strengthened reserves and capital, and our strong deposit base, we believe we’re well-positioned to continue to successfully weather this uniquely challenging period.”

Earnings Highlights

 

     Three Months Ended

     March 31,
2008

    December 31,
2007

    March 31,
2007

(In millions, except per share data)


   Amount

    EPS

    Amount

    EPS

    Amount

   EPS

Earnings

                                   

Net income (loss)

   $ (350 )   —       193     0.10     2,302    1.20

Discontinued operations, net of income taxes

     —       —       (142 )   (0.07 )   —      —  

Dividends on preferred stock

     (43 )   —       —       —       —      —  
    


 

 

 

 
  

Net income (loss) available to common stockholders

   $ (393 )   (0.20 )   51     0.03     2,302    1.20

Discontinued operations, net of income taxes

     —       —       142     0.07     —      —  
    


 

 

 

 
  

Income (loss) from continuing operations

     (393 )   (0.20 )   193     0.10     2,302    1.20

Net merger-related and restructuring expenses

     123     0.06     108     0.05     6    —  
    


 

 

 

 
  

Earnings (loss) excluding merger-related and restructuring expenses, and discontinued operations

   $ (270 )   (0.14 )   301     0.15     2,308    1.20
    


 

 

 

 
  

Financial ratios

                                   

Return on average common stockholders’ equity

     (2.11 )%         0.28           13.47     

Net interest margin (a)

     2.92           2.88           3.06     

Fee and other income as % of total revenue (a)

     39.15           36.99           45.15     

Overhead efficiency ratio (a)

     68.91 %         78.00           55.88     
    


       

       
    

Capital adequacy (b)

                                   

Tier 1 capital ratio

     7.5 %         7.4           7.4     

Total capital ratio

     12.1           11.8           11.4     

Leverage ratio

     6.2 %         6.1           6.1     
    


       

       
    

Asset quality

                                   

Allowance for loan losses as % of nonaccrual and restructured loans

     84 %         90           207     

Allowance for loan losses as % of loans, net

     1.37           0.98           0.80     

Allowance for credit losses as % of loans, net (c)

     1.41           1.02           0.84     

Net charge-offs as % of average loans, net

     0.66           0.41           0.15     

Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale

     1.70 %         1.14           0.42     

(a) Tax-equivalent.
(b) The first quarter of 2008 is based on estimates.
(c) The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments.

Results include after-tax net merger-related expenses of 6 cents per share in the first quarter of 2008; these expenses did not affect earnings per share in the first quarter of 2007. Excluding the merger-related expenses, results were a net loss available to common stockholders of $270 million, or 14 cents per share, in the first quarter of 2008. Results also include the impact of the A.G. Edwards, Inc., acquisition from October 1, 2007.

 

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WACHOVIA REPORTS 1ST QUARTER RESULTS; ANNOUNCES CAPITAL INITIATIVES/page 3

 

Wachovia Corporation

 

     Three Months Ended

(In millions)


   March 31,
2008

    December 31,
2007

    March 31,
2007

Net interest income (Tax-equivalent)

   $ 4,805     4,674     4,537

Fee and other income

     3,091     2,744     3,734

Total revenue (Tax-equivalent)

     7,896     7,418     8,271

Provision for credit losses

     2,831     1,497     177

Noninterest expense

     5,441     5,786     4,621

Income (loss) from continuing operations before income taxes (benefits) (Tax-equivalent)

     (531 )   28     3,337

Income taxes (benefits) (Tax-equivalent)

     (181 )   (165 )   1,035

Net income (loss) available to common stockholders

     (393 )   51     2,302

Average loans, net

     465,936     449,805     415,261

Average core deposits

   $ 394,513     390,043     369,270

Other key trends in the first quarter of 2008 compared with the first quarter of 2007 included:

 

   

Revenue of $7.9 billion on higher loan and deposit balances, while fee and other income declined due to net market disruption-related valuation losses of $2.0 billion and significantly reduced fee income related to the disruption in the capital markets. Otherwise, strong momentum continued in fiduciary and asset management fees and brokerage commissions reflecting the A.G. Edwards acquisition and organic growth. Results included $445 million in net gains related to adoption of new fair value accounting standards and a $225 million gain related to the Visa initial public offering.

 

   

Net interest margin compression of 14 basis points year over year, although the margin rose 4 basis points from the fourth quarter of 2007. Net interest income rose modestly, reflecting growth in average commercial loans, up 26 percent, and average consumer loans, up 4 percent, as well as solid core deposit growth, up 7 percent. Average loan growth included the impact of $7.3 billion of transfers to the loan portfolio from held-for-sale as well as strength in commercial, commercial real estate and traditional conforming mortgage loans. Deposit growth was led by strength in IRAs and money market accounts.

 

   

An 18 percent increase in noninterest expense largely reflecting the impact of A.G. Edwards, as well as growth in credit-related sundry expense.

 

   

Provision for credit losses of $2.8 billion, which exceeded net charge-offs by $2.1 billion. The provision largely reflected more severe deterioration in the residential housing market, particularly in specific markets in California and Florida, as well as the result of the refinements made to the credit reserve model for the payment option product. These refinements incorporate multiple and more granular factors regarding unprecedented consumer behavior, housing price deterioration and increased foreclosures. Net charge-offs were $765 million, or an annualized 0.66 percent of average net loans. Total nonperforming assets including loans held for sale were $8.4 billion, or 1.70 percent of loans, foreclosed properties and loans held for sale, largely reflecting increases in consumer real estate-related nonperforming assets due to the effects of the weakened housing industry.

Lines of Business

The following discussion covers the results for Wachovia’s four core business segments and is on a segment earnings basis, which excludes net merger-related and restructuring expenses, other intangible amortization and discontinued operations. Segment earnings are the basis on which

 

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WACHOVIA REPORTS 1ST QUARTER RESULTS; ANNOUNCES CAPITAL INITIATIVES/page 4

 

Wachovia manages and allocates capital to its business segments. In accordance with Wachovia’s business segment methodology, provision expense in excess of charge-offs, which amounted to $2.1 billion in the first quarter of 2008, is not allocated to business segments.

Pages 13 and 14 include a reconciliation of segment results to Wachovia’s consolidated results of operations in accordance with GAAP.

General Bank Highlights

 

     Three Months Ended

(In millions)


   March 31,
2008

    December 31,
2007

   March 31,
2007

Net interest income (Tax-equivalent)

   $ 3,455     3,402    3,398

Fee and other income

     990     929    845

Total revenue (Tax-equivalent)

     4,500     4,389    4,290

Provision for credit losses

     569     320    147

Noninterest expense

     2,050     2,041    1,869

Segment earnings

   $ 1,195     1,287    1,444

Cash overhead efficiency ratio (Tax-equivalent)

     45.55 %   46.50    43.56

Average loans, net

   $ 311,447     303,269    288,229

Average core deposits

     297,680     296,568    284,046

Economic capital, average

   $ 12,695     11,179    10,662

General Bank

The General Bank includes retail, small business and commercial customers. The first quarter of 2008 compared with the first quarter of 2007 included:

 

   

Earnings of $1.2 billion, down $249 million, driven by rapidly rising credit costs and related expenses, which overshadowed continued strong sales momentum reflected in total revenue of $4.5 billion, up 5 percent.

 

   

Average loan growth of 8 percent, with double digit growth in wholesale businesses and 4 percent growth in mortgage lending as a decline in prepayments offset lower volumes on the payment option mortgage product.

 

   

Significant efforts in the mortgage business included a restructuring of the operating model, extensive loss mitigation efforts and initiatives to increase the volume of marketable mortgages.

 

   

A home equity lending decline of 41 percent, reflecting implementation of tightened credit standards. Over 95 percent of our home equity loans are originated through our branch network and other direct channels.

 

   

A 26 percent increase in auto loan originations

 

   

Average core deposit growth of 5 percent, largely reflecting strength in wholesale deposits, which were up 10 percent, and an increase of 4 percent in retail deposits.

 

   

Growth in net new retail checking accounts slowed to a still strong increase of 174,000 in the first quarter of 2008 compared with an increase of 268,000 in the first quarter of 2007.

 

   

Net new checking accounts include 139,000 linked to the new Way2Save accounts, which launched in mid-January 2008.

 

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WACHOVIA REPORTS 1ST QUARTER RESULTS; ANNOUNCES CAPITAL INITIATIVES/page 5

 

   

17 percent growth in fee and other income, with strength in service charges, interchange income and mortgage banking fee income. Strong interchange income reflected an 18 percent increase in debit/credit card volume from the first quarter of 2007.

 

   

Noninterest expense up 10 percent due to growth in credit-related sundry expense, as well as on continued strategic investment in de novo branch activity, Western expansion and buildup in credit card operations. During the first quarter of 2008, 23 de novo branches were opened and 58 branches were consolidated. As a result of performance initiatives, operating leverage continued to improve, which enabled the continued strategic investment.

 

   

A $422 million increase in the provision for credit losses largely reflecting rapid deterioration in consumer real estate in certain housing markets and higher losses on auto loans.

Wealth Management Highlights

 

     Three Months Ended

(In millions)


   March 31,
2008

    December 31,
2007

   March 31,
2007

Net interest income (Tax-equivalent)

   $ 181     183    181

Fee and other income

     211     214    196

Total revenue (Tax-equivalent)

     397     400    380

Provision for credit losses

     5     7    1

Noninterest expense

     246     249    247

Segment earnings

   $ 92     91    84

Cash overhead efficiency ratio (Tax-equivalent)

     62.08 %   62.27    65.12

Average loans, net

   $ 22,413     21,791    20,394

Average core deposits

     17,397     16,773    17,267

Economic capital, average

   $ 705     616    592

Wealth Management

Wealth Management includes private banking, personal trust, investment advisory services, charitable services, financial planning and insurance brokerage. The first quarter of 2008 compared with the first quarter of 2007 included:

 

   

Earnings of $92 million on 4 percent revenue growth in challenging markets.

 

   

Strong fiduciary and asset management fees as a pricing initiative implemented in the third quarter of 2007 and new sales offset declines in equity valuations. Insurance commissions declined largely due to a soft market for insurance premiums and nonstrategic insurance account dispositions.

 

   

Relatively flat net interest income as solid loan growth offset deposit spread compression.

 

   

A slight decline in expense driven by efficiency initiatives, which offset the impact of private banking and Western expansion investment.

 

   

5 percent growth in assets under management to $79.8 billion as asset gathering overcame market depreciation.

 

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WACHOVIA REPORTS 1ST QUARTER RESULTS; ANNOUNCES CAPITAL INITIATIVES/page 6

 

Corporate and Investment Bank Highlights

 

     Three Months Ended

(In millions)


   March 31,
2008

    December 31,
2007

    March 31,
2007

Net interest income (Tax-equivalent)

   $ 1,032     988     716

Fee and other income

     (159 )   (555 )   1,109

Total revenue (Tax-equivalent)

     823     383     1,782

Provision for credit losses

     197     112     6

Noninterest expense

     747     952     911

Segment earnings (loss)

   $ (77 )   (431 )   550

Cash overhead efficiency ratio (Tax-equivalent)

     90.76 %   247.83     51.10

Average loans, net

   $ 101,024     91,702     73,385

Average core deposits

     33,623     36,200     34,227

Economic capital, average

   $ 13,242     11,293     8,329

Corporate and Investment Bank

The Corporate and Investment Bank includes corporate lending, investment banking, and treasury and international trade finance. First quarter 2008 results compared with the first quarter of 2007 included:

 

   

A segment loss of $77 million driven by $1.6 billion in net valuation losses reflecting continued disruption in the capital markets and reduced origination volume in most market-related businesses.

 

   

Market valuation losses, net of applicable hedges, of:

 

   

$339 million in subprime residential asset-backed collateralized debt obligations and other related exposures, compared with $818 million in fourth quarter 2007, excluding discontinued operations;

 

   

$521 million in commercial mortgage structured products, compared with $600 million in fourth quarter 2007;

 

   

$251 million in consumer mortgage structured products, compared with $123 million in fourth quarter 2007;

 

   

$309 million in leveraged finance net of fees, compared with a net $93 million gain in fourth quarter 2007; and

 

   

$144 million in non-subprime collateralized debt obligations and other structured products, compared with a $59 million net gain in fourth quarter 2007.

 

   

A 44 percent increase in net interest income, which reflected 38 percent growth in average loans including the transfer into the loan portfolio at fair value of certain loans originally slated for disposition, as well as loan growth in the corporate lending and global financial institutions business.

 

   

Principal investing revenue of $414 million, largely due to a net $486 million of gains related to the adoption of new fair value accounting standards in January 2008, offset by mark-to-market losses in the direct investment portfolio.

 

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WACHOVIA REPORTS 1ST QUARTER RESULTS; ANNOUNCES CAPITAL INITIATIVES/page 7

 

 

   

An 18 percent decline in noninterest expense primarily due to lower variable compensation and reduced headcount in investment banking.

 

   

Provision of $197 million largely reflecting residential-related commercial real estate losses.

Capital Management Highlights

 

     Three Months Ended

(In millions)


   March 31,
2008

    December 31,
2007

   March 31,
2007

Net interest income (Tax-equivalent)

   $ 274     318    259

Fee and other income

     2,191     2,211    1,477

Total revenue (Tax-equivalent)

     2,455     2,518    1,728

Provision for credit losses

     —       —      —  

Noninterest expense

     1,855     1,938    1,237

Segment earnings

   $ 381     368    312

Cash overhead efficiency ratio (Tax-equivalent)

     75.54 %   76.96    71.59

Average loans, net

   $ 2,562     2,295    1,554

Average core deposits

     43,084     38,019    31,683

Economic capital, average

   $ 2,143     2,120    1,334

Capital Management

Capital Management includes retail brokerage services and asset management. The first quarter of 2008 compared with the first quarter of 2007 included:

 

   

Earnings of $381 million on 42 percent revenue growth, which primarily reflected the A.G. Edwards acquisition. In addition, solid growth in retail brokerage managed account and other asset-based fees despite declining equity markets offset lower transactional revenue and equity syndicate distribution fees. The impact of FDIC sweep deposit growth of $11.0 billion partially offset spread compression in the declining interest rate environment.

 

   

Record annuity sales of $2.7 billion, including $1.5 billion in the General Bank financial centers.

 

   

50 percent growth in noninterest expense largely due to the effect of A.G. Edwards, as well as higher legal expense and revenue-based commissions.

Total assets under management of $258.7 billion at March 31, 2008, decreased 6 percent from December 31, 2007, primarily due to declining market valuations.

***

Wachovia Corporation (NYSE:WB) is one of the nation’s largest diversified financial services companies, with assets of $808.9 billion and market capitalization of $53.8 billion at March 31, 2008. Wachovia provides a broad range of retail banking and brokerage, asset and wealth management, and corporate and investment banking products and services to customers through 3,300 retail financial centers in 21 states from Connecticut to Florida and west to Texas and California, and nationwide retail brokerage, mortgage lending and auto finance businesses. Globally, clients are served in selected corporate and institutional sectors and through more than 40 international offices. Our retail brokerage operations under the Wachovia Securities brand name manage more than $1.1 trillion in client assets through 18,600 registered representatives in 1,500 offices nationwide. Online banking is available at wachovia.com; online brokerage products and services at wachoviasec.com; and investment products and services at evergreeninvestments.com.

 

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WACHOVIA REPORTS 1ST QUARTER RESULTS; ANNOUNCES CAPITAL INITIATIVES/page 8

 

Forward-Looking Statements

This news release contains various forward-looking statements. A discussion of various factors that could cause Wachovia Corporation’s actual results to differ materially from those expressed in such forward-looking statements is included in Wachovia’s filings with the Securities and Exchange Commission, including its Current Report on Form 8-K dated April 14, 2008.

Explanation of Wachovia’s Use of Certain Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this news release includes certain non-GAAP financial measures, including those presented on page 2 and on page 11 under the captions “Earnings Excluding Merger-Related and Restructuring Expenses, and Discontinued Operations” and “Earnings Excluding Merger-Related and Restructuring Expenses, Other Intangible Amortization and Discontinued Operations”, and which are reconciled to GAAP financial measures on pages 21 and 22. In addition, in this news release certain designated net interest income amounts are presented on a tax-equivalent basis, including the calculation of the overhead efficiency ratio.

Wachovia believes these non-GAAP financial measures provide information useful to investors in understanding the underlying operational performance of the company, its business and performance trends and facilitates comparisons with the performance of others in the financial services industry. Specifically, Wachovia believes the exclusion of merger-related and restructuring expenses, discontinued operations and the cumulative effect of a change in accounting principle permits evaluation and a comparison of results for on-going business operations, and it is on this basis that Wachovia’s management internally assesses the company’s performance. Those non-operating items are excluded from Wachovia’s segment measures used internally to evaluate segment performance in accordance with GAAP because management does not consider them particularly relevant or useful in evaluating the operating performance of our business segments. In addition, because of the significant amount of deposit base intangible amortization, Wachovia believes the exclusion of this expense provides investors with consistent and meaningful comparisons to other financial services firms. Wachovia’s management makes recommendations to its board of directors about dividend payments based on reported earnings excluding merger-related and restructuring expenses, other intangible amortization, discontinued operations and the cumulative effect of a change in accounting principle, and has communicated certain dividend payout ratio goals to investors on this basis. Management believes this payout ratio is useful to investors because it provides investors with a better understanding of and permits investors to monitor Wachovia’s dividend payout policy. Wachovia also believes the presentation of net interest income on a tax-equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry standards. Wachovia operates one of the largest retail brokerage businesses in our industry, and we have presented an overhead efficiency ratio excluding these brokerage services, which management believes is useful to investors in comparing the performance of our banking business with other banking companies.

Although Wachovia believes the above non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP basis financial measures.

Earnings Conference Call and Supplemental Materials

Wachovia CEO Ken Thompson and CFO Tom Wurtz will review Wachovia’s first quarter 2008 results in a conference call and audio web cast beginning at 8:00 a.m. Eastern Daylight Saving Time today. This review may include a discussion of certain non-GAAP financial measures. Supplemental materials relating to first quarter results, which also include a reconciliation of any non-GAAP measures to Wachovia’s reported financials, are available on the Internet at Wachovia.com/investor, and investors are encouraged to access these materials in advance of the conference call.

Web cast Instructions: To gain access to the web cast, which will be “listen-only,” go to Wachovia.com/investor and click on the link “Wachovia First Quarter Earnings Audio Web cast.” In order to listen to the web cast, you will need to download either Real Player or Media Player.

Teleconference Instructions: The telephone number for the conference call is 888-357-9787 for U.S. callers or 706-679-7342 for international callers. You will be asked to tell the answering coordinator your name and the name of your firm. Mention the conference Access Code: WB Investor.

Replay: Monday, April 14, by 12:00 Noon EST and continuing through 5 p.m. EST Friday, July 11. Replay telephone number is 706-645-9291; access code: 43662109.

Investors seeking further information should contact the Investor Relations team: Alice Lehman at 704-374-4139 or Ellen Taylor at 704-383-1381. Media seeking further information should contact the Corporate Media Relations team: Mary Eshet at 704-383-7777 or Christy Phillips at 704-383-8178.

Wachovia may file a registration statement (including prospectus) with the SEC for the offering to which this communication relates. Investors should read the prospectus in that registration statement, the preliminary prospectus supplement and other documents that Wachovia has filed with the SEC for more complete information about Wachovia and this offering. Documents may be obtained for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, investors may call toll-free 1-800-326-5897 to request that the prospectus be mailed after filing.

 

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PAGE 9

WACHOVIA CORPORATION AND SUBSIDIARIES

FINANCIAL TABLES

TABLE OF CONTENTS

 

     PAGE

Financial Highlights—Five Quarters Ended March 31, 2008

   10

Other Financial Data—Five Quarters Ended March 31, 2008

   11

Consolidated Statements of Income—Five Quarters Ended March 31, 2008

   12

Business Segments—Three Months Ended March 31, 2008 and December 31, 2007

   13

Business Segments—Three Months Ended March 31, 2007

   14

Loans—On-Balance Sheet, and Managed and Servicing Portfolios—Five Quarters Ended March 31, 2008

   15

Allowance for Credit Losses—Five Quarters Ended March 31, 2008

   16

Nonperforming Assets—Five Quarters Ended March 31, 2008

   17

Consolidated Balance Sheets—Five Quarters Ended March 31, 2008

   18

Net Interest Income Summaries—Five Quarters Ended March 31, 2008

   19 - 20

Reconciliation of Certain Non-GAAP Financial Measures—Five Quarters Ended March 31, 2008

   21 - 22


PAGE 10

WACHOVIA CORPORATION AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS

(Unaudited)

 

     2008

    2007

 

(Dollars in millions, except per share data)


   First
Quarter


    Fourth
Quarter


    Third
Quarter


    Second
Quarter


   First
Quarter


 

EARNINGS SUMMARY

                               

Net interest income (GAAP)

   $ 4,752     4,630     4,551     4,449    4,500  

Tax-equivalent adjustment

     53     44     33     38    37  
    


 

 

 
  

Net interest income (Tax-equivalent)

     4,805     4,674     4,584     4,487    4,537  

Fee and other income

     3,091     2,744     2,933     4,240    3,734  
    


 

 

 
  

Total revenue (Tax-equivalent)

     7,896     7,418     7,517     8,727    8,271  

Provision for credit losses

     2,831     1,497     408     179    177  

Other noninterest expense

     5,097     5,488     4,397     4,755    4,493  

Merger-related and restructuring expenses

     241     187     36     32    10  

Other intangible amortization

     103     111     92     103    118  
    


 

 

 
  

Total noninterest expense

     5,441     5,786     4,525     4,890    4,621  

Minority interest in income of consolidated subsidiaries

     155     107     189     139    136  
    


 

 

 
  

Income (loss) from continuing operations before income taxes (benefits) (Tax-equivalent)

     (531 )   28     2,395     3,519    3,337  

Income taxes (benefits)

     (234 )   (209 )   656     1,140    998  

Tax-equivalent adjustment

     53     44     33     38    37  
    


 

 

 
  

Income (loss) from continuing operations

     (350 )   193     1,706     2,341    2,302  

Discontinued operations, net of income taxes

     —       (142 )   (88 )   —      —    
    


 

 

 
  

Net income (loss)

     (350 )   51     1,618     2,341    2,302  

Dividends on preferred stock

     43     —       —       —      —    
    


 

 

 
  

Net income (loss) available to common stockholders

   $ (393 )   51     1,618     2,341    2,302  
    


 

 

 
  

Diluted earnings per common share (a)

   $ (0.20 )   0.03     0.85     1.22    1.20  

Return on average common stockholders’ equity

     (2.11 )%   0.28     9.19     13.54    13.47  

Return on average assets

     (0.18 )   0.03     0.88     1.33    1.35  

Overhead efficiency ratio

     68.91 %   78.00     60.20     56.02    55.88  

Operating leverage

   $ 823     (1,359 )   (847 )   189    (13 )
    


 

 

 
  

ASSET QUALITY

                               

Allowance for loan losses as % of loans, net

     1.37 %   0.98     0.78     0.79    0.80  

Allowance for loan losses as % of nonperforming assets

     78     84     115     157    189  

Allowance for credit losses as % of loans, net

     1.41     1.02     0.82     0.83    0.84  

Net charge-offs as % of average loans, net

     0.66     0.41     0.19     0.14    0.15  

Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale

     1.70 %   1.14     0.66     0.49    0.42  
    


 

 

 
  

CAPITAL ADEQUACY (b)

                               

Tier I capital ratio

     7.5 %   7.4     7.1     7.5    7.4  

Total capital ratio

     12.1     11.8     10.8     11.5    11.4  

Leverage ratio

     6.2 %   6.1     6.1     6.2    6.1  
    


 

 

 
  

OTHER DATA

                               

Average basic common shares (In millions)

     1,963     1,959     1,885     1,891    1,894  

Average diluted common shares (In millions)

     1,977     1,983     1,910     1,919    1,925  

Actual common shares (In millions) (c)

     1,992     1,980     1,901     1,903    1,913  

Dividends paid per common share

   $ 0.64     0.64     0.64     0.56    0.56  

Dividend payout ratio on common shares

     (320.00 )%   2133.33     75.29     45.90    46.67  

Book value per common share (c)

   $ 36.40     37.66     36.90     36.40    36.47  

Common stock price

     27.00     38.03     50.15     51.25    55.05  

Market capitalization (c)

   $ 53,782     75,302     95,326     97,530    105,330  

Common stock price to book value (c)

     74 %   101     136     141    151  

FTE employees

     120,378     121,890     109,724     110,493    110,369  

Total financial centers/brokerage offices

     4,850     4,894     4,167     4,135    4,167  

ATMs

     5,308     5,139     5,123     5,099    5,146  
    


 

 

 
  


(a) Calculated using average basic common shares in the first quarter of 2008.
(b) The first quarter of 2008 is based on estimates.
(c) Includes restricted stock for which the holder receives dividends and has full voting rights.


PAGE 11

WACHOVIA CORPORATION AND SUBSIDIARIES

OTHER FINANCIAL DATA

(Unaudited)

 

     2008

    2007

 

(In millions)


   First
Quarter


    Fourth
Quarter


    Third
Quarter


    Second
Quarter


   First
Quarter


 

EARNINGS EXCLUDING MERGER-RELATED
AND RESTRUCTURING EXPENSES, AND
DISCONTINUED OPERATIONS (a) (b)

                               

Return on average common stockholders’ equity

     (1.45 )%   1.62     9.81     13.66    13.50  

Return on average assets

     (0.12 )   0.16     0.94     1.34    1.35  

Overhead efficiency ratio

     65.85     75.48     59.73     55.65    55.75  

Overhead efficiency ratio excluding brokerage

     61.92 %   74.54     56.82     52.04    52.60  

Operating leverage

   $ 877     (1,208 )   (843 )   210    (51 )
    


 

 

 
  

EARNINGS EXCLUDING MERGER-RELATED AND RESTRUCTURING EXPENSES, OTHER INTANGIBLE AMORTIZATION AND DISCONTINUED OPERATIONS (a) (b) (c)

                               

Dividend payout ratio on common shares

     (640.00 )%   355.56     68.09     44.09    45.16  

Return on average tangible common stockholders’ equity

     (2.80 )   5.05     23.88     33.57    33.27  

Return on average tangible assets

     (0.09 )   0.20     1.03     1.47    1.49  

Overhead efficiency ratio

     64.55     73.97     58.51     54.47    54.33  

Overhead efficiency ratio excluding brokerage

     60.14 %   72.40     55.32     50.61    50.88  

Operating leverage

   $ 869     (1,187 )   (855 )   197    (75 )
    


 

 

 
  

OTHER FINANCIAL DATA

                               

Net interest margin

     2.92 %   2.88     2.92     2.96    3.06  

Fee and other income as % of total revenue

     39.15     36.99     39.02     48.58    45.15  

Effective income tax rate (d)

     40.04     122.05     27.33     32.78    30.22  

Effective tax rate (Tax-equivalent) (d) (e)

     34.06 %   127.17     28.38     33.51    30.99  
    


 

 

 
  

AVERAGE BALANCE SHEET DATA

                               

Commercial loans, net

   $ 198,578     188,164     174,672     165,512    157,288  

Consumer loans, net

     267,358     261,641     255,129     255,745    257,973  

Loans, net

     465,936     449,805     429,801     421,257    415,261  

Earning assets

     659,033     650,140     628,773     605,978    593,663  

Total assets

     783,593     763,487     729,004     704,773    691,029  

Core deposits

     394,513     390,043     379,009     378,496    369,270  

Total deposits

     443,353     437,566     416,107     408,418    399,106  

Interest-bearing liabilities

     611,099     599,130     574,399     547,669    535,778  

Stockholders’ equity

   $ 78,747     73,986     69,857     69,317    69,320  
    


 

 

 
  

PERIOD-END BALANCE SHEET DATA

                               

Commercial loans, net

   $ 211,700     198,566     189,545     175,369    167,039  

Consumer loans, net

     268,782     263,388     259,661     253,751    254,624  

Loans, net

     480,482     461,954     449,206     429,120    421,663  

Goodwill and other intangible assets

                               

Goodwill

     43,068     43,122     38,848     38,766    38,838  

Deposit base

     573     619     670     727    796  

Customer relationships

     1,375     1,410     620     651    684  

Tradename

     90     90     90     90    90  

Total assets

     808,890     782,896     754,168     715,428    702,669  

Core deposits

     398,562     397,405     377,865     378,188    377,358  

Total deposits

     444,964     449,129     421,937     410,030    405,270  

Stockholders’ equity

   $ 78,307     76,872     70,140     69,266    69,786  
    


 

 

 
  


(a) These financial measures are calculated by excluding from GAAP net income (loss) presented on page 10, $123 million, $108 million, $22 million, $20 million and $6 million in the first quarter of 2008 and the fourth, third, second and first quarters of 2007, respectively, of after-tax net merger-related and restructuring expenses and $142 million and $88 million after tax in the fourth and third quarters of 2007, respectively, of discontinued operations.
(b) See page 10 for the most directly comparable GAAP financial measure and pages 21 and 22 for a more detailed reconciliation.
(c) These financial measures are calculated by excluding from GAAP net income (loss) presented on page 10, $64 million, $65 million, $59 million, $66 million and $76 million in the first quarter of 2008 and the fourth, third, second and first quarters of 2007, respectively, of deposit base and other intangible amortization.
(d) The fourth and third quarters of 2007 include taxes on discontinued operations.
(e) The tax-equivalent tax rate applies to fully tax-equivalized revenues.


PAGE 12

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     2008

    2007

(In millions, except per share data)


   First
Quarter


    Fourth
Quarter


    Third
Quarter


    Second
Quarter


   First
Quarter


INTEREST INCOME

                             

Interest and fees on loans

   $ 7,577     7,980     7,937     7,723    7,618

Interest and dividends on securities

     1,496     1,616     1,529     1,474    1,478

Trading account interest

     571     557     566     506    433

Other interest income

     535     757     799     647    611
    


 

 

 
  

Total interest income

     10,179     10,910     10,831     10,350    10,140
    


 

 

 
  

INTEREST EXPENSE

                             

Interest on deposits

     2,941     3,433     3,334     3,180    3,014

Interest on short-term borrowings

     523     673     801     706    669

Interest on long-term debt

     1,963     2,174     2,145     2,015    1,957
    


 

 

 
  

Total interest expense

     5,427     6,280     6,280     5,901    5,640
    


 

 

 
  

Net interest income

     4,752     4,630     4,551     4,449    4,500

Provision for credit losses

     2,831     1,497     408     179    177
    


 

 

 
  

Net interest income after provision for credit losses

     1,921     3,133     4,143     4,270    4,323
    


 

 

 
  

FEE AND OTHER INCOME

                             

Service charges

     676     716     689     667    614

Other banking fees

     498     497     471     449    416

Commissions

     914     970     600     649    659

Fiduciary and asset management fees

     1,439     1,436     1,029     1,015    953

Advisory, underwriting and other investment banking fees

     261     249     393     454    407

Trading account profits (losses)

     (308 )   (524 )   (301 )   195    128

Principal investing

     446     41     372     298    48

Securities gains (losses)

     (205 )   (320 )   (34 )   23    53

Other income

     (630 )   (321 )   (286 )   490    456
    


 

 

 
  

Total fee and other income

     3,091     2,744     2,933     4,240    3,734
    


 

 

 
  

NONINTEREST EXPENSE

                             

Salaries and employee benefits

     3,260     3,468     2,628     3,122    2,972

Occupancy

     379     375     325     331    312

Equipment

     323     334     283     309    307

Marketing

     97     80     74     78    62

Communications and supplies

     186     191     176     178    173

Professional and consulting fees

     196     271     194     205    177

Other intangible amortization

     103     111     92     103    118

Merger-related and restructuring expenses

     241     187     36     32    10

Sundry expense

     656     769     717     532    490
    


 

 

 
  

Total noninterest expense

     5,441     5,786     4,525     4,890    4,621
    


 

 

 
  

Minority interest in income of consolidated subsidiaries

     155     107     189     139    136
    


 

 

 
  

Income (loss) from continuing operations before income taxes (benefits)

     (584 )   (16 )   2,362     3,481    3,300

Income taxes (benefits)

     (234 )   (209 )   656     1,140    998
    


 

 

 
  

Income (loss) from continuing operations

     (350 )   193     1,706     2,341    2,302

Discontinued operations, net of income taxes

     —       (142 )   (88 )   —      —  
    


 

 

 
  

Net income (loss)

     (350 )   51     1,618     2,341    2,302

Dividends on preferred stock

     43     —       —       —      —  
    


 

 

 
  

Net income (loss) available to common stockholders

   $ (393 )   51     1,618     2,341    2,302
    


 

 

 
  

PER COMMON SHARE DATA (after preferred stock dividends)

                             

Basic earnings

                             

Income (loss) from continuing operations

   $ (0.20 )   0.10     0.91     1.24    1.22

Net income (loss) available to common stockholders

     (0.20 )   0.03     0.86     1.24    1.22

Diluted earnings (a)

                             

Income (loss) from continuing operations

     (0.20 )   0.10     0.90     1.22    1.20

Net income (loss) available to common stockholders

     (0.20 )   0.03     0.85     1.22    1.20

Cash dividends

   $ 0.64     0.64     0.64     0.56    0.56

AVERAGE COMMON SHARES

                             

Basic

     1,963     1,959     1,885     1,891    1,894

Diluted

     1,977     1,983     1,910     1,919    1,925
    


 

 

 
  

(a) Calculated using average basic common shares in the first quarter of 2008.


PAGE 13

WACHOVIA CORPORATION AND SUBSIDIARIES

BUSINESS SEGMENTS

(Unaudited)

 

     Three Months Ended March 31, 2008

 

(In millions)


   General
Bank


   Wealth
Management


   Corporate
and
Investment
Bank


    Capital
Management


    Parent

    Net Merger-
Related and
Restructuring
Expenses (b)


    Total

 

CONSOLIDATED

                                          

Net interest income (a)

   $ 3,455    181    1,032     274     (137 )   (53 )   4,752  

Fee and other income

     990    211    (159 )   2,191     (142 )   —       3,091  

Intersegment revenue

     55    5    (50 )   (10 )   —       —       —    
    

  
  

 

 

 

 

Total revenue (a)

     4,500    397    823     2,455     (279 )   (53 )   7,843  

Provision for credit losses

     569    5    197     —       2,060     —       2,831  

Noninterest expense

     2,050    246    747     1,855     302     241     5,441  

Minority interest

     —      —      —       —       198     (43 )   155  

Income taxes (benefits)

     675    54    (65 )   218     (1,041 )   (75 )   (234 )

Tax-equivalent adjustment

     11    —      21     1     20     (53 )   —    
    

  
  

 

 

 

 

Net income (loss)

     1,195    92    (77 )   381     (1,818 )   (123 )   (350 )

Dividends on preferred stock

     —      —      —       —       43     —       43  
    

  
  

 

 

 

 

Net income (loss) available to common stockholders

   $ 1,195    92    (77 )   381     (1,861 )   (123 )   (393 )
    

  
  

 

 

 

 

 

     Three Months Ended December 31, 2007

 

(In millions)


   General
Bank


   Wealth
Management


   Corporate
and
Investment
Bank


    Capital
Management


    Parent

    Net Merger-
Related and
Restructuring
Expenses (b)


    Total

 

CONSOLIDATED

                                          

Net interest income (a)

   $ 3,402    183    988     318     (217 )   (44 )   4,630  

Fee and other income

     929    214    (555 )   2,211     (55 )   —       2,744  

Intersegment revenue

     58    3    (50 )   (11 )   —       —       —    
    

  
  

 

 

 

 

Total revenue (a)

     4,389    400    383     2,518     (272 )   (44 )   7,374  

Provision for credit losses

     320    7    112     —       1,058     —       1,497  

Noninterest expense

     2,041    249    952     1,938     419     187     5,786  

Minority interest

     —      —      —       —       118     (11 )   107  

Income taxes (benefits)

     730    53    (269 )   211     (866 )   (68 )   (209 )

Tax-equivalent adjustment

     11    —      19     1     13     (44 )   —    
    

  
  

 

 

 

 

Income (loss) from continuing operations

     1,287    91    (431 )   368     (1,014 )   (108 )   193  

Discontinued operations, net of income taxes

     —      —      —       —       (142 )   —       (142 )
    

  
  

 

 

 

 

Net income (loss)

   $ 1,287    91    (431 )   368     (1,156 )   (108 )   51  
    

  
  

 

 

 

 


PAGE 14

WACHOVIA CORPORATION AND SUBSIDIARIES

BUSINESS SEGMENTS

(Unaudited)

 

     Three Months Ended March 31, 2007

(In millions)


   General
Bank


   Wealth
Management


   Corporate
and
Investment
Bank


    Capital
Management


    Parent

    Net Merger-
Related and
Restructuring
Expenses (b)


    Total

CONSOLIDATED

                                        

Net interest income (a)

   $ 3,398    181    716     259     (17 )   (37 )   4,500

Fee and other income

     845    196    1,109     1,477     107     —       3,734

Intersegment revenue

     47    3    (43 )   (8 )   1     —       —  
    

  
  

 

 

 

 

Total revenue (a)

     4,290    380    1,782     1,728     91     (37 )   8,234

Provision for credit losses

     147    1    6     —       23     —       177

Noninterest expense

     1,869    247    911     1,237     347     10     4,621

Minority interest

     —      —      —       —       136     —       136

Income taxes (benefits)

     819    48    305     179     (349 )   (4 )   998

Tax-equivalent adjustment

     11    —      10     —       16     (37 )   —  
    

  
  

 

 

 

 

Net income (loss)

   $ 1,444    84    550     312     (82 )   (6 )   2,302
    

  
  

 

 

 

 

(a) Tax-equivalent.
(b) The tax-equivalent amounts are eliminated herein in order for “Total” amounts to agree with amounts appearing in the Consolidated Statements of Income.


PAGE 15

WACHOVIA CORPORATION AND SUBSIDIARIES

LOANS—ON-BALANCE SHEET, AND MANAGED AND SERVICING PORTFOLIOS

(Unaudited)

 

     2008

    2007

 

(In millions)


   First
Quarter


    Fourth
Quarter


    Third
Quarter


    Second
Quarter


    First
Quarter


 

ON-BALANCE SHEET LOAN PORTFOLIO

COMMERCIAL

                                

Commercial, financial and agricultural

   $ 119,193     112,509     109,269     102,397     99,687  

Real estate—construction and other

     18,597     18,543     18,167     17,449     16,965  

Real estate—mortgage

     26,370     23,846     21,514     20,448     20,130  

Lease financing

     23,637     23,913     23,966     24,083     24,053  

Foreign

     33,616     29,540     26,471     20,959     16,240  
    


 

 

 

 

Total commercial

     221,413     208,351     199,387     185,336     177,075  
    


 

 

 

 

CONSUMER

                                

Real estate secured

     230,197     227,719     225,355     220,293     220,682  

Student loans

     9,324     8,149     7,742     6,757     8,479  

Installment loans

     27,437     25,635     24,763     25,017     23,665  
    


 

 

 

 

Total consumer

     266,958     261,503     257,860     252,067     252,826  
    


 

 

 

 

Total loans

     488,371     469,854     457,247     437,403     429,901  

Unearned income

     (7,889 )   (7,900 )   (8,041 )   (8,283 )   (8,238 )
    


 

 

 

 

Loans, net (On-balance sheet)

   $ 480,482     461,954     449,206     429,120     421,663  
    


 

 

 

 

MANAGED PORTFOLIO (a) 

                                

COMMERCIAL

                                

On-balance sheet loan portfolio

   $ 221,413     208,351     199,387     185,336     177,075  

Securitized loans—off-balance sheet

     120     131     142     170     181  

Loans held for sale

     3,342     9,414     13,905     11,573     10,467  
    


 

 

 

 

Total commercial

     224,875     217,896     213,434     197,079     187,723  
    


 

 

 

 

CONSUMER

                                

Real estate secured

                                

On-balance sheet loan portfolio

     230,197     227,719     225,355     220,293     220,682  

Securitized loans—off-balance sheet

     6,845     7,230     7,625     8,112     6,595  

Securitized loans included in securities

     11,683     10,755     5,963     6,091     5,629  

Loans held for sale

     5,960     4,816     3,583     4,079     4,089  
    


 

 

 

 

Total real estate secured

     254,685     250,520     242,526     238,575     236,995  
    


 

 

 

 

Student

                                

On-balance sheet loan portfolio

     9,324     8,149     7,742     6,757     8,479  

Securitized loans—off-balance sheet

     2,586     2,811     2,856     2,905     3,045  

Securitized loans included in securities

     52     52     52     52     52  

Loans held for sale

     —       —       1,968     2,046     —    
    


 

 

 

 

Total student

     11,962     11,012     12,618     11,760     11,576  
    


 

 

 

 

Installment

                                

On-balance sheet loan portfolio

     27,437     25,635     24,763     25,017     23,665  

Securitized loans—off-balance sheet

     1,968     2,263     2,572     3,105     2,851  

Securitized loans included in securities

     39     47     55     116     126  

Loans held for sale

     2,127     2,542     1,975     35     476  
    


 

 

 

 

Total installment

     31,571     30,487     29,365     28,273     27,118  
    


 

 

 

 

Total consumer

     298,218     292,019     284,509     278,608     275,689  
    


 

 

 

 

Total managed portfolio

   $ 523,093     509,915     497,943     475,687     463,412  
    


 

 

 

 

SERVICING PORTFOLIO (b)

                                

Commercial

   $ 354,624     353,464     337,721     298,374     271,038  

Consumer

   $ 27,415     27,967     28,474     26,789     25,952  
    


 

 

 

 


(a) The managed portfolio includes the on-balance sheet loan portfolio, loans securitized for which the retained interests are classified in securities on-balance sheet, loans held for sale on-balance sheet and the off-balance sheet portfolio of securitized loans sold, where we service the loans.
(b) The servicing portfolio consists of third party commercial and consumer loans for which our sole function is that of servicing the loans for the third parties.


PAGE 16

WACHOVIA CORPORATION AND SUBSIDIARIES

ALLOWANCE FOR CREDIT LOSSES

(Unaudited)

 

     2008

    2007

 

(In millions)


   First
Quarter


    Fourth
Quarter


    Third
Quarter


    Second
Quarter


    First
Quarter


 

ALLOWANCE FOR CREDIT LOSSES (a)

                                

Balance, beginning of period

   $ 4,717     3,691     3,552     3,533     3,514  

Provision for credit losses

     2,834     1,467     381     168     175  

Provision for credit losses relating to loans
transferred to loans held for sale or sold

     7     6     3     4     1  

Provision for credit losses for unfunded
lending commitments

     (10 )   24     24     7     1  

LOAN LOSSES

                                

Commercial, financial and agricultural

     (171 )   (67 )   (41 )   (39 )   (34 )

Commercial real estate—construction and mortgage

     (81 )   (117 )   (5 )   (4 )   (6 )
    


 

 

 

 

Total commercial

     (252 )   (184 )   (46 )   (43 )   (40 )
    


 

 

 

 

Real estate secured

     (351 )   (156 )   (59 )   (40 )   (33 )

Student loans

     (3 )   (4 )   (5 )   (2 )   (3 )

Installment and other loans (b)

     (242 )   (225 )   (168 )   (138 )   (142 )
    


 

 

 

 

Total consumer

     (596 )   (385 )   (232 )   (180 )   (178 )
    


 

 

 

 

Total loan losses

     (848 )   (569 )   (278 )   (223 )   (218 )
    


 

 

 

 

LOAN RECOVERIES

                                

Commercial, financial and agricultural

     14     22     9     15     9  

Commercial real estate—construction and mortgage

     1     —       3     —       3  
    


 

 

 

 

Total commercial

     15     22     12     15     12  
    


 

 

 

 

Real estate secured

     10     9     12     11     6  

Student loans

     1     2     3     —       1  

Installment and other loans (b)

     57     75     45     47     44  
    


 

 

 

 

Total consumer

     68     86     60     58     51  
    


 

 

 

 

Total loan recoveries

     83     108     72     73     63  
    


 

 

 

 

Net charge-offs

     (765 )   (461 )   (206 )   (150 )   (155 )
    


 

 

 

 

Allowance relating to loans acquired, transferred to loans held for sale or sold

     (16 )   (10 )   (63 )   (10 )   (3 )
    


 

 

 

 

Balance, end of period

   $ 6,767     4,717     3,691     3,552     3,533  
    


 

 

 

 

ALLOWANCE FOR CREDIT LOSSES

                                

Allowance for loan losses

   $ 6,567     4,507     3,505     3,390     3,378  

Reserve for unfunded lending commitments

     200     210     186     162     155  
    


 

 

 

 

Total allowance for credit losses

   $ 6,767     4,717     3,691     3,552     3,533  
    


 

 

 

 

ALLOWANCE FOR LOAN LOSSES

                                

as % of loans, net

     1.37 %   0.98     0.78     0.79     0.80  

as % of nonaccrual and restructured loans (c)

     84     90     129     174     207  

as % of nonperforming assets (c)

     78     84     115     157     189  

ALLOWANCE FOR CREDIT LOSSES

                                

as % of loans, net

     1.41 %   1.02     0.82     0.83     0.84  
    


 

 

 

 

NET CHARGE-OFFS AS % OF AVERAGE LOANS, NET (d)

                                

Commercial, financial and agricultural

     0.41 %   0.12     0.10     0.07     0.08  

Commercial real estate—construction and mortgage

     0.73     1.12     0.02     0.04     0.04  
    


 

 

 

 

Total commercial

     0.48     0.34     0.08     0.07     0.07  
    


 

 

 

 

Real estate secured

     0.59     0.26     0.08     0.05     0.05  

Student loans

     0.08     0.10     0.14     0.07     0.10  

Installment and other loans (b)

     2.76     2.35     1.99     1.47     1.67  
    


 

 

 

 

Total consumer

     0.79     0.46     0.27     0.19     0.20  
    


 

 

 

 

Total as % of average loans, net

     0.66 %   0.41     0.19     0.14     0.15  
    


 

 

 

 

CONSUMER REAL ESTATE SECURED NET CHARGE-OFFS

                                

First lien

   $ (291 )   (122 )   (32 )   (17 )   (15 )

Second lien

     (50 )   (25 )   (15 )   (12 )   (12 )
    


 

 

 

 

Total consumer real estate secured net charge-offs

   $ (341 )   (147 )   (47 )   (29 )   (27 )
    


 

 

 

 


(a) The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments.
(b) Principally auto loans.
(c) These ratios do not include nonperforming assets included in loans held for sale.
(d) Annualized.

 


PAGE 17

WACHOVIA CORPORATION AND SUBSIDIARIES

NONPERFORMING ASSETS

(Unaudited)

 

     2008

    2007

(In millions)


   First
Quarter


    Fourth
Quarter


   Third
Quarter


   Second
Quarter


   First
Quarter


NONPERFORMING ASSETS

                           

Nonaccrual loans

                           

Commercial

                           

Commercial, financial and agricultural

   $ 908     602    354    318    303

Commercial real estate - construction and mortgage

     1,750     1,059    289    161    117
    


 
  
  
  

Total commercial

     2,658     1,661    643    479    420
    


 
  
  
  

Consumer

                           

Real estate secured

                           

First lien

     5,015     3,234    1,986    1,380    1,124

Second lien

     75     58    41    44    37

Installment and other loans (a)

     40     42    45    42    51
    


 
  
  
  

Total consumer

     5,130     3,334    2,072    1,466    1,212
    


 
  
  
  

Total nonaccrual loans

     7,788     4,995    2,715    1,945    1,632

Troubled debt restructurings (b)

     56     —      —      —      —  

Foreclosed properties

     530     389    334    207    155
    


 
  
  
  

Total nonperforming assets

   $ 8,374     5,384    3,049    2,152    1,787
    


 
  
  
  

as % of loans, net, and foreclosed properties (c)

     1.74 %   1.16    0.68    0.50    0.42
    


 
  
  
  

Nonperforming assets included in loans held for sale

                           

Commercial

   $ —       —      —      —      1

Consumer

     5     62    59    42    25
    


 
  
  
  

Total nonperforming assets included in loans held for sale

     5     62    59    42    26
    


 
  
  
  

Nonperforming assets included in loans and in loans held for sale

   $ 8,379     5,446    3,108    2,194    1,813
    


 
  
  
  

as % of loans, net, foreclosed properties and loans held for sale (d)

     1.70 %   1.14    0.66    0.49    0.42
    


 
  
  
  

PAST DUE LOANS 90 DAYS AND OVER,

AND NONACCRUAL LOANS (c)

                           
                           

Accruing loans past due 90 days and over

   $ 1,047     708    590    562    555

Nonaccrual loans

     7,788     4,995    2,715    1,945    1,632
    


 
  
  
  

Total past due loans 90 days and over, and nonaccrual loans

   $ 8,835     5,703    3,305    2,507    2,187
    


 
  
  
  

Commercial as % of loans, net

     1.31 %   0.89    0.38    0.31    0.28

Consumer as % of loans, net

     2.26 %   1.49    1.00    0.78    0.68
    


 
  
  
  

(a) Principally auto loans; nonaccrual status does not apply to student loans.
(b) Troubled debt restructurings were not significant prior to the first quarter of 2008.
(c) These ratios do not include nonperforming assets included in loans held for sale.
(d) These ratios reflect nonperforming loans included in loans held for sale. Loans held for sale are recorded at the lower of cost or market value, and accordingly, the amounts shown and included in the ratios are net of the transferred allowance for loan losses and the lower of cost or market value adjustments.


PAGE 18

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     2008

    2007

 

(In millions, except per share data)


   First
Quarter


    Fourth
Quarter


    Third
Quarter


    Second
Quarter


    First
Quarter


 

ASSETS

                                

Cash and due from banks

   $ 14,703     15,124     12,681     12,065     12,593  

Interest-bearing bank balances

     3,236     3,057     4,449     2,726     2,591  

Federal funds sold and securities purchased under resale agreements

     10,644     15,449     11,995     11,511     10,322  
    


 

 

 

 

Total cash and cash equivalents

     28,583     33,630     29,125     26,302     25,506  
    


 

 

 

 

Trading account assets

     72,592     55,882     54,835     51,540     44,161  

Securities

     114,183     115,037     111,827     106,184     106,841  

Loans, net of unearned income

     480,482     461,954     449,206     429,120     421,663  

Allowance for loan losses

     (6,567 )   (4,507 )   (3,505 )   (3,390 )   (3,378 )
    


 

 

 

 

Loans, net

     473,915     457,447     445,701     425,730     418,285  
    


 

 

 

 

Loans held for sale

     11,429     16,772     21,431     17,733     15,032  

Premises and equipment

     6,733     6,605     6,002     6,080     6,058  

Due from customers on acceptances

     1,109     1,418     1,295     831     992  

Goodwill

     43,068     43,122     38,848     38,766     38,838  

Other intangible assets

     2,038     2,119     1,380     1,468     1,570  

Other assets

     55,240     50,864     43,724     40,794     45,386  
    


 

 

 

 

Total assets

   $ 808,890     782,896     754,168     715,428     702,669  
    


 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                

Deposits

                                

Noninterest-bearing deposits

     60,951     60,893     56,825     62,112     63,399  

Interest-bearing deposits

     384,013     388,236     365,112     347,918     341,871  
    


 

 

 

 

Total deposits

     444,964     449,129     421,937     410,030     405,270  

Short-term borrowings

     57,857     50,393     62,714     52,715     47,144  

Bank acceptances outstanding

     1,118     1,424     1,303     840     1,004  

Trading account liabilities

     28,887     21,585     17,771     19,319     17,291  

Other liabilities

     19,036     19,151     18,424     18,080     16,741  

Long-term debt

     175,653     161,007     158,584     142,047     142,334  
    


 

 

 

 

Total liabilities

     727,515     702,689     680,733     643,031     629,784  
    


 

 

 

 

Minority interest in net assets of consolidated subsidiaries

     3,068     3,335     3,295     3,131     3,099  
    


 

 

 

 

STOCKHOLDERS’ EQUITY

                                

Dividend Equalization Preferred shares, no par value, 97 million shares issued and outstanding at March 31, 2008

     —       —       —       —       —    

Non-Cumulative Perpetual Class A Preferred Stock, Series I, $100,000 liquidation preference per share, 25,010 shares authorized

     —       —       —       —       —    

Non-Cumulative Perpetual Class A Preferred Stock, Series J, $1,000 liquidation preference per share, 92 million depositary shares issued and outstanding at March 31, 2008

     2,300     2,300     —       —       —    

Non-Cumulative Perpetual Class A Preferred Stock, Series K, $1,000 liquidation preference per share, 3.5 million shares issued and outstanding at March 31, 2008

     3,500     —       —       —       —    

Common stock, $3.33-1/3 par value, authorized 3 billion shares, outstanding 1.965 billion shares at March 31, 2008

     6,551     6,534     6,283     6,289     6,316  

Paid-in capital

     56,368     56,149     51,938     51,905     52,026  

Retained earnings

     11,763     13,456     14,670     14,335     13,378  

Accumulated other comprehensive income, net

     (2,175)     (1,567)     (2,751)     (3,263)     (1,934)  
    


 

 

 

 

Total stockholders’ equity

     78,307     76,872     70,140     69,266     69,786  
    


 

 

 

 

Total liabilities and stockholders’ equity

   $ 808,890     782,896     754,168     715,428     702,669  
    


 

 

 

 


PAGE 19

WACHOVIA CORPORATION AND SUBSIDIARIES

NET INTEREST INCOME SUMMARIES

(Unaudited)

 

    FIRST QUARTER 2008

    FOURTH QUARTER 2007

 

(In millions)


  Average
Balances


  Interest
Income/
Expense


   Average
Rates
Earned/
Paid


    Average
Balances


  Interest
Income/
Expense


   Average
Rates
Earned/
Paid


 

ASSETS

                                     

Interest-bearing bank balances

  $ 4,253     51    4.85 %   $ 5,083     64    5.05 %

Federal funds sold and securities purchased under resale agreements

    11,865     103    3.49       12,901     155    4.77  

Trading account assets

    44,655     589    5.28       37,694     569    6.04  

Securities

    110,401     1,545    5.60       115,436     1,625    5.62  

Loans

                                     

Commercial

                                     

Commercial, financial and agricultural

    115,377     1,671    5.82       111,500     1,908    6.79  

Real estate—construction and other

    18,634     251    5.42       18,435     318    6.85  

Real estate—mortgage

    25,291     374    5.95       22,973     426    7.36  

Lease financing

    7,167     140    7.79       7,374     145    7.82  

Foreign

    32,109     389    4.86       27,882     380    5.42  
   

 

        

 

      

Total commercial

    198,578     2,825    5.72       188,164     3,177    6.70  
   

 

        

 

      

Consumer

                                     

Real estate secured

    231,392     3,926    6.79       227,893     4,042    7.08  

Student loans

    9,155     113    4.96       8,073     126    6.19  

Installment loans

    26,811     659    9.88       25,675     651    10.04  
   

 

        

 

      

Total consumer

    267,358     4,698    7.04       261,641     4,819    7.35  
   

 

        

 

      

Total loans

    465,936     7,523    6.48       449,805     7,996    7.08  
   

 

        

 

      

Loans held for sale

    11,592     223    7.71       18,998     360    7.53  

Other earning assets

    10,331     146    5.69       10,223     166    6.48  
   

 

        

 

      

Total earning assets excluding derivatives

    659,033     10,180    6.19       650,140     10,935    6.70  

Risk management derivatives (a)

    —       52    0.04       —       19    0.01  
   

 

        

 

      

Total earning assets including derivatives

    659,033     10,232    6.23       650,140     10,954    6.71  
         

  

       

  

Cash and due from banks

    11,645                  12,028             

Other assets

    112,915                  101,319             
   

              

            

Total assets

  $ 783,593                $ 763,487             
   

              

            

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                     

Interest-bearing deposits

                                     

Savings and NOW accounts

    86,452     236    1.10       83,370     345    1.64  

Money market accounts

    128,074     747    2.34       121,717     949    3.09  

Other consumer time

    123,655     1,437    4.68       127,061     1,557    4.86  

Foreign

    26,197     231    3.55       27,354     306    4.44  

Other time

    22,643     265    4.71       20,169     263    5.16  
   

 

        

 

      

Total interest-bearing deposits

    387,021     2,916    3.03       379,671     3,420    3.57  

Federal funds purchased and securities sold under repurchase agreements

    35,956     308    3.45       36,386     413    4.50  

Commercial paper

    5,509     38    2.74       7,272     78    4.27  

Securities sold short

    6,919     62    3.63       6,728     61    3.62  

Other short-term borrowings

    10,154     45    1.77       10,369     58    2.24  

Long-term debt

    165,540     1,961    4.75       158,704     2,129    5.34  
   

 

        

 

      

Total interest-bearing liabilities excluding derivatives

    611,099     5,330    3.51       599,130     6,159    4.08  

Risk management derivatives (a)

    —       97    0.06       —       121    0.08  
   

 

        

 

      

Total interest-bearing liabilities including derivatives

    611,099     5,427    3.57       599,130     6,280    4.16  
         

  

       

  

Noninterest-bearing deposits

    56,332                  57,895             

Other liabilities

    37,415                  32,476             

Stockholders’ equity

    78,747                  73,986             
   

              

            

Total liabilities and stockholders’ equity

  $ 783,593                $ 763,487             
   

              

            

Interest income and rate earned—including derivatives

        $ 10,232    6.23 %         $ 10,954    6.71 %

Interest expense and equivalent rate paid—including derivatives

          5,427    3.31             6,280    3.83  
         

  

       

  

Net interest income and margin—including derivatives

        $ 4,805    2.92 %         $ 4,674    2.88 %
         

  

       

  


(a) The rates earned and the rates paid on risk management derivatives are based on off-balance sheet notional amounts. The fair value of these instruments is included in other assets and other liabilities.


PAGE 20

WACHOVIA CORPORATION AND SUBSIDIARIES

NET INTEREST INCOME SUMMARIES

(Unaudited)

 

     THIRD QUARTER 2007

    SECOND QUARTER 2007

    FIRST QUARTER 2007

 

(In millions)


   Average
Balances


   Interest
Income/
Expense


   Average
Rates
Earned/
Paid


    Average
Balances


   Interest
Income/
Expense


   Average
Rates
Earned/
Paid


    Average
Balances


   Interest
Income/
Expense


   Average
Rates
Earned/
Paid


 

ASSETS

                                                            

Interest-bearing bank balances

   $ 6,459      93    5.68 %   $ 3,384      50    6.00 %   $ 1,523      30    7.80 %

Federal funds sold and securities purchased under resale agreements

     14,206      194    5.42       12,110      158    5.25       14,124      177    5.07  

Trading account assets

     38,737      575    5.93       35,165      519    5.90       29,681      442    5.97  

Securities

     111,424      1,522    5.46       108,433      1,467    5.41       108,071      1,461    5.42  

Loans

                                                            

Commercial

                                                            

Commercial, financial and agricultural

     106,263      1,927    7.19       101,012      1,805    7.16       98,413      1,736    7.16  

Real estate—construction and other

     17,795      344    7.66       17,334      329    7.62       16,508      313    7.69  

Real estate—mortgage

     20,883      406    7.71       20,175      378    7.53       20,231      380    7.61  

Lease financing

     7,523      146    7.80       7,759      150    7.74       7,730      150    7.75  

Foreign

     22,208      308    5.53       19,232      265    5.51       14,406      196    5.49  
    

  

        

  

        

  

      

Total commercial

     174,672      3,131    7.12       165,512      2,927    7.09       157,288      2,775    7.15  
    

  

        

  

        

  

      

Consumer

                                                            

Real estate secured

     223,356      4,070    7.28       222,096      4,042    7.28       225,909      4,148    7.36  

Student loans

     7,299      122    6.61       8,850      141    6.42       8,524      136    6.47  

Installment loans

     24,474      614    9.96       24,799      609    9.84       23,540      566    9.75  
    

  

        

  

        

  

      

Total consumer

     255,129      4,806    7.52       255,745      4,792    7.50       257,973      4,850    7.55  
    

  

        

  

        

  

      

Total loans

     429,801      7,937    7.35       421,257      7,719    7.34       415,261      7,625    7.40  
    

  

        

  

        

  

      

Loans held for sale

     20,209      363    7.14       17,644      285    6.47       16,748      255    6.16  

Other earning assets

     7,937      138    6.91       7,985      144    7.23       8,255      139    6.82  
    

  

        

  

        

  

      

Total earning assets excluding derivatives

     628,773      10,822    6.86       605,978      10,342    6.84       593,663      10,129    6.87  

Risk management derivatives (a)

     —        42    0.02       —        46    0.03       —        48    0.03  
    

  

        

  

        

  

      

Total earning assets including derivatives

     628,773      10,864    6.88       605,978      10,388    6.87       593,663      10,177    6.90  
           

  

        

  

        

  

Cash and due from banks

     11,134                   11,533                   12,260              

Other assets

     89,097                   87,262                   85,106              
    

               

               

             

Total assets

   $ 729,004                 $ 704,773                 $ 691,029              
    

               

               

             

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                                            

Interest-bearing deposits

                                                            

Savings and NOW accounts

     81,851      357    1.73       83,977      367    1.75       84,247      373    1.80  

Money market accounts

     116,404      980    3.34       111,562      976    3.51       107,785      917    3.45  

Other consumer time

     122,474      1,507    4.88       120,684      1,455    4.84       116,262      1,369    4.77  

Foreign

     23,322      292    4.97       21,871      270    4.96       20,802      249    4.85  

Other time

     13,776      187    5.40       8,051      107    5.30       9,034      119    5.36  
    

  

        

  

        

  

      

Total interest-bearing deposits

     357,827      3,323    3.68       346,145      3,175    3.68       338,130      3,027    3.63  

Federal funds purchased and securities sold under repurchase agreements

     44,334      556    4.98       38,031      473    4.98       35,142      430    4.97  

Commercial paper

     5,799      65    4.42       5,143      60    4.67       4,920      57    4.72  

Securities sold short

     7,420      70    3.74       7,158      67    3.75       8,709      83    3.86  

Other short-term borrowings

     7,793      55    2.74       7,688      52    2.77       6,898      44    2.54  

Long-term debt

     151,226      2,067    5.44       143,504      1,923    5.37       141,979      1,880    5.35  
    

  

        

  

        

  

      

Total interest-bearing liabilities excluding derivatives

     574,399      6,136    4.24       547,669      5,750    4.21       535,778      5,521    4.17  

Risk management derivatives (a)

     —        144    0.10       —        151    0.11       —        119    0.09  
    

  

        

  

        

  

      

Total interest-bearing liabilities including derivatives

     574,399      6,280    4.34       547,669      5,901    4.32       535,778      5,640    4.26  
           

  

        

  

        

  

Noninterest-bearing deposits

     58,280                   62,273                   60,976              
                                                              

Other liabilities

     26,468                   25,514                   24,955              

Stockholders’ equity

     69,857                   69,317                   69,320              
    

               

               

             

Total liabilities and stockholders’ equity

   $ 729,004                 $ 704,773                 $ 691,029              
    

               

               

             

Interest income and rate earned—including derivatives

          $ 10,864    6.88 %          $ 10,388    6.87 %          $ 10,177    6.90 %

Interest expense and equivalent rate paid—including derivatives

            6,280    3.96              5,901    3.91              5,640    3.84  
           

  

        

  

        

  

Net interest income and margin—including derivatives

          $ 4,584    2.92 %          $ 4,487    2.96 %          $ 4,537    3.06 %
           

  

        

  

        

  


PAGE 21

WACHOVIA CORPORATION AND SUBSIDIARIES

RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES

(Unaudited)

 

          2008

    2007

 

(In millions, except per share data)


   *

   First
Quarter


    Fourth
Quarter


    Third
Quarter


    Second
Quarter


    First
Quarter


 

INCOME (LOSS) FROM CONTINUING OPERATIONS

                                     

Net income (loss) (GAAP)

   A    $ (350 )   51     1,618     2,341     2,302  

Discontinued operations, net of income taxes (GAAP)

          —       142     88     —   &n