Exhibit (19)

First Quarter 2006

Management’s Discussion and Analysis

Quarterly Financial Supplement

Three Months Ended March 31, 2006

WACHOVIA CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL SUPPLEMENT
THREE MONTHS ENDED MARCH 31, 2006
TABLE OF CONTENTS

	PAGE
Financial Highlights		1
Management’s Discussion and Analysis		2
Explanation of Our Use of Non-GAAP Financial Measures		23
Selected Statistical Data		24
Summaries of Income, Per Common Share and Balance Sheet Data		25
Merger-Related and Restructuring Expenses		26
Business Segments		27
Net Trading Revenue — Investment Banking		35
Selected Ratios		35
Trading Account Assets and Liabilities		36
Loans — On-Balance Sheet, and Managed and Servicing Portfolios		37
Loans Held for Sale		38
Allowance for Loan Losses and Nonperforming Assets		39
Reserve for Unfunded Lending Commitments		40
Nonaccrual Loan Activity		41
Goodwill and Other Intangible Assets		42
Deposits		43
Time Deposits in Amounts of $100,000 or More		43
Long-Term Debt		44
Changes in Stockholders’ Equity		45
Capital Ratios		46
Net Interest Income Summaries — Five Quarters Ended March 31, 2006		47
Consolidated Balance Sheets — Five Quarters Ended March 31, 2006		49
Consolidated Statements of Income — Five Quarters Ended March 31, 2006		50
Wachovia Corporation and Subsidiaries — Consolidated Financial Statements		51

FINANCIAL HIGHLIGHTS

	Three Months Ended
	March 31,					Percent
						Increase
(Dollars in millions, except per share data)	2006			2005		(Decrease)
EARNINGS SUMMARY
Net interest income (GAAP)	$	3,490			3,413		2	%
Tax-equivalent adjustment		49			61		(20	)
Net interest income (Tax-equivalent)		3,539			3,474		2
Fee and other income		3,517			2,995		17
Total revenue (Tax-equivalent)		7,056			6,469		9
Provision for credit losses		61			36		69
Other noninterest expense		4,079			3,696		10
Merger-related and restructuring expenses		68			61		11
Other intangible amortization		92			115		(20	)
Total noninterest expense		4,239			3,872		9
Minority interest in income of consolidated subsidiaries		95			64		48
Income before income taxes (Tax-equivalent)		2,661			2,497		7
Tax-equivalent adjustment		49			61		(20	)
Income taxes		884			815		8
Net income	$	1,728			1,621		7	%
Diluted earnings per common share	$	1.09			1.01		8	%
Return on average common stockholders’ equity		14.62	%		13.92		—
Return on average assets		1.34	%		1.31		—
ASSET QUALITY
Allowance for loan losses as % of loans, net		1.08	%		1.20		—
Allowance for loan losses as % of nonperforming assets		389			262		—
Allowance for credit losses as % of loans, net		1.14			1.27		—
Net charge-offs as % of average loans, net		0.09			0.08		—
Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale		0.28	%		0.50		—
CAPITAL ADEQUACY
Tier I capital ratio		7.87	%		7.91		—
Total capital ratio		11.45			11.40		—
Leverage ratio		6.86	%		5.99		—
OTHER FINANCIAL DATA
Net interest margin		3.21	%		3.31		—
Fee and other income as % of total revenue		49.84			46.30		—
Effective income tax rate		33.84	%		33.42		—
BALANCE SHEET DATA
Securities	$	118,818			116,731		2	%
Loans, net		280,932			227,266		24
Total assets		541,842			506,833		7
Total deposits		328,564			297,657		10
Long-term debt		70,218			47,932		46
Stockholders’ equity	$	49,789			46,467		7	%
OTHER DATA
Average diluted common shares (In millions)		1,586			1,603		(1	)%
Actual common shares (In millions)		1,608			1,576		2
Dividends paid per common share	$	0.51			0.46		11
Dividend payout ratio on common shares		46.79	%		45.54		3
Book value per common share	$	30.95			29.48		5
Common stock price		56.05			50.91		10
Market capitalization	$	90,156			80,256		12
Common stock price to book value		181	%		173		5
FTE employees		97,134			93,669		4
Total financial centers/brokerage offices		3,889			3,970		(2	)
ATMs		5,179			5,234		(1	)%

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Management’s Discussion and Analysis

This discussion contains forward-looking statements. Please refer to our First Quarter 2006 Report on Form 10-Q for a discussion of various factors that could cause our actual results to differ materially from those expressed in such forward-looking statements.

Summary of Results of Operations	Three Months Ended
			March 31,
(In millions, except per share data)	2006		2005
Net interest income (GAAP)	$	3,490		3,413
Tax-equivalent adjustment		49		61
Net interest income (a)		3,539		3,474
Fee and other income		3,517		2,995
Total revenue (a)		7,056		6,469
Provision for credit losses		61		36
Other noninterest expense		4,079		3,696
Merger-related and restructuring expenses		68		61
Other intangible amortization		92		115
Total noninterest expense		4,239		3,872
Minority interest in income of consolidated subsidiaries		95		64
Income taxes		884		815
Tax-equivalent adjustment		49		61
Net income		1,728		1,621
Diluted earnings per common share	$	1.09		1.01

^(a) Tax-equivalent.

Executive Summary

Wachovia’s net income available to common stockholders in the first quarter of 2006 was $1.7 billion, up 7 percent from the same period of 2005, and diluted earnings per common share were up 8 percent to $1.09. Results include after-tax net merger-related and restructuring expenses of 3 cents per share in the first quarter of 2006 and 2 cents per share in the first quarter of 2005. In addition, results include a $100 million credit card-related termination fee received as a result of the Bank of America/MBNA merger, which is discussed further in the Outlook section, and $98 million in increased employee stock compensation expense related to the implementation of a new share-based payment accounting standard, which is discussed further in the Outlook section and in Notes to Consolidated Financial Statements. In addition, results include the impact of acquisitions, including the March 1, 2006, Westcorp merger.

In the first quarter of 2006 compared with the first quarter of 2005, revenue rose 9 percent to $7.1 billion, as strong balance sheet growth overcame margin compression resulting from a flattening yield curve. Net interest income growth of 2 percent reflected strength in loans and deposits. Fee and other income grew 17 percent with strength in nearly every category, with higher interchange fees, consumer service charges, and with a rebound in market-sensitive businesses, highlighted by higher trading profits, investment banking fees and commissions. In addition, other income included the $100 million termination fee and a $33 million gain related to the Archipelago/New York Stock Exchange merger. Results also included securities losses of $48 million, which consisted of $64 million of losses in the corporate portfolio offset by gains of $16 million in our Corporate and Investment Bank related to corporate lending activities. Fee and other income represented 50 percent of total revenue in the first quarter of 2006, compared with 46 percent in the first quarter a year ago.

Credit quality continued to be very strong, with an annualized net charge-off ratio of 0.09 percent and, while nonperforming assets increased, they remained a very low 0.28 percent of loans, foreclosed properties and loans held for sale. Provision expense rose $25 million from a low level in the first quarter of 2005, which reflected higher recoveries. We continue to mitigate risk and volatility on our balance sheet by actively monitoring and reducing potential problem loans, including their sale when prudent.

Average net loans increased 18 percent in the first quarter of 2006 from the first quarter of 2005 to $260.6 billion. Average consumer loan growth of 26 percent in the same period was led by real estate-

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secured loans, including the effect of the transfer of $12.5 billion of home equity lines to the loan portfolio from loans held for sale at year-end 2005, and the addition of an average $4.6 billion of Westcorp auto loans. Excluding the transfer of home equity lines and the impact of Westcorp, consumer loans increased 8 percent. Average commercial loan growth of 12 percent reflected strength in middle-market commercial and large corporate lending. Average core deposits increased 7 percent from the first quarter of 2005 to $290.2 billion and average low-cost core deposits increased 4 percent in the same period to $243.9 billion at March 31, 2006.

Total noninterest expense rose 9 percent in the first quarter of 2006 from the first quarter of 2005, largely reflecting the $98 million increase in employee stock compensation expense, the effect of acquisitions and higher revenue-related incentive expense.

Our four major businesses continued to generate strong sales activity and market share gains in the first quarter of 2006. The General Bank’s earnings rose 21 percent to $1.1 billion, with exceptionally strong fee and other income. Capital Management grew earnings to $181 million, reflecting strength in managed account fees and growth in net interest income as deposit spreads improved. Wealth Management’s earnings declined 5 percent to $58 million as higher expenses largely related to employee stock compensation expense and a new investment platform outpaced 16 percent revenue growth. Our Corporate and Investment Bank earned $519 million, reflecting strong investment banking results, fees related to the issuance of Wachovia corporate securities, which are eliminated in the Parent, and the gain from the Archipelago/New York Stock Exchange merger.

In the first quarter of 2006, we paid common stockholders dividends of $822 million, or 51 cents per common share. Our goal is to return 40 percent to 50 percent of our earnings to shareholders as dividends, and in the first quarter of 2006 our dividend payout ratio was 46.79 percent, or 43.97 percent excluding merger-related and restructuring expenses and other intangible amortization, which is the basis we use in measuring our goal.

Our balance sheet is strong and well capitalized under regulatory guidelines with a tier 1 capital ratio of 7.87 percent and a leverage ratio of 6.86 percent at March 31, 2006.

Outlook

Based on our consistent performance, confidence in our business model, capital strength and improving market conditions, we have maintained the 2006 financial outlook we provided in our 2005 Annual Report. We note, however, revised economic assumptions for 2006 include growth in the real gross domestic product (GDP) of 3.30 percent; inflation (based on the Consumer Price Index) of 3.00 percent; a federal funds rate of 5.25 percent and a 10-year treasury bond rate of 5.00 percent by December 2006; and growth in the S&P 500 index of 7.00 percent.

The following outlook is for the full year 2006 compared with an “adjusted” 2005 amount, which includes our reported results and the reported results for the nine months ended September 30, 2005, for Westcorp, an auto dealer financial services business that we acquired on March 1, 2006. Amounts discussed below exclude merger-related and restructuring expenses and the effect, if any, of accounting proposals, including the $98 million of employee stock compensation costs we incurred in the first quarter of 2006. Other than approximately $9 million of expense in the second quarter relating to awards to Capital Management employees who will be retirement-eligible at the date of grant, we currently do not expect to incur any additional costs of this type in 2006.

• Net interest income growth in the low single-digit percentage range on a tax-equivalent basis from an adjusted $14.6 billion.

• Fee income growth in the low double-digit percentage range from an adjusted $12.3 billion.

• Noninterest expense growth in the low single-digit percentage range from an adjusted $15.8 billion.

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• Minority interest expense increase in the mid-teens percentage range from an adjusted $367 million.

• Loan growth in the mid-teens percentage range from an adjusted $240.6 billion, including consumer loan growth in the high teens from an adjusted $107.9 billion, and commercial loan growth in the low double-digit percentage range from an adjusted $132.7 billion.

• Net charge-offs in the 15 basis point to 25 basis point range, up from an adjusted 15 basis points, with provision expense also expected to be in the 15 basis point to 25 basis point range.

• An effective income tax rate of approximately 34 percent to 35 percent on a tax-equivalent basis.

• A tier 1 capital ratio above 7.5 percent; a leverage ratio above 6.0 percent, and a tangible capital to tangible asset ratio above 4.7 percent.

• A dividend payout ratio of 40 percent to 50 percent of earnings excluding merger-related and restructuring expenses, and other intangible amortization.

• Use of excess capital to opportunistically repurchase shares, to reinvest in our businesses and to undertake financially attractive, shareholder friendly acquisitions.

Recent proposals on leveraged lease accounting and uncertain tax positions by the Financial Accounting Standards Board (FASB), if adopted as currently proposed, may have an impact on our financial results in future periods. The impact, if adopted as currently proposed, would include (i) a one-time noncash charge recorded as a cumulative effect of a change in accounting principle, and (ii) in the leveraged lease proposal, the recognition as income in future periods of amounts in the aggregate approximating the amount of the one-time charge. The Accounting and Regulatory Matters section has additional information about these FASB proposals.

With the successful integration of SouthTrust systems, products and signs to the Wachovia platform completed in 2005, we expect 2006 to reflect our original expectation for annual after-tax expense savings of $255 million.

We reentered the credit card market as a direct issuer in January 2006. First quarter 2006 results include the $100 million MBNA termination fee, which will defray systems, personnel and other costs to build our credit card business. We may use securities gains or other gains during the rest of the year to defray the initial dilution associated with building this business. Actions taken in the first quarter of 2006 better position us to be able to do this during the rest of the year. Key leaders are in place and we are hiring additional personnel, making decisions on operating systems and establishing business strategies. Marketing strategies, which will focus on our existing customer base, are expected to be launched in midsummer.

We continue to evaluate our operations and organizational structures to ensure they are closely aligned with our goal of maximizing performance through increased efficiency and competitiveness in our four core businesses. We are striving to make Wachovia a more efficient company, but it is not our intention to have the lowest overhead efficiency ratio in our peer group because we expect to continue to invest in higher growth businesses. As we disclosed in January 2005, we believe we will slow annual expense growth by $600 million to $1.0 billion by 2007. We believe this will result in position reductions in the range of 3,500 to 4,000, approximately 20 percent of which will result from normal attrition, although we also expect to add positions in higher growth businesses. To date, we have identified initial expense reduction opportunities, which when implemented, are expected to result in cost savings in the range of $650 million to $750 million annually.

In conjunction with these efforts, we have established overhead efficiency targets, excluding merger-related and restructuring expenses, other intangible amortization, discontinued operations and changes in accounting principle, for each of our four businesses and for the overall company to achieve by 2007. These 2007 targets are as follows:

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·	General Bank	45 percent to 47 percent
·	Capital Management	75 percent to 77 percent
·	Wealth Management	60 percent to 62 percent
·	Corporate and Investment Bank	49 percent to 51 percent
·	Wachovia Corporation	52 percent to 55 percent

Segment tables in the Business Segments section have additional information.

When consistent with our overall business strategy, we may consider disposing of certain assets, branches, subsidiaries or lines of business. We continue to routinely explore acquisition opportunities in areas that would complement our core businesses, and frequently conduct due diligence activities in connection with possible acquisitions. As a result, acquisition discussions and, in some cases, negotiations frequently take place and future acquisitions involving cash, debt or equity securities could occur.

Critical Accounting Policies

Our accounting and reporting policies are in accordance with U.S. generally accepted accounting principles (GAAP) and they conform to general practices within the applicable industries. We use a significant amount of judgment and estimates based on assumptions for which the actual results are uncertain when we make the estimations. We have identified five policies as being particularly sensitive in terms of judgments and the extent to which significant estimates are used: allowance for loan losses and the reserve for unfunded lending commitments (which is recorded in other liabilities); fair value of certain financial instruments; consolidation; goodwill impairment; and contingent liabilities. For more information on these critical accounting policies, please refer to our 2005 Annual Report on Form 10-K.

Average Balance Sheets and Interest Rates	Three Months Ended					Three Months Ended
	March 31, 2006					March 31, 2005
	Average		Interest			Average		Interest
(In millions)	Balances		Rates			Balances		Rates
Interest-bearing bank balances	$	2,872		4.31	%	$	2,484		2.62	%
Federal funds sold		19,657		4.31			24,272		2.55
Trading account assets		27,240		5.08			35,147		4.59
Securities		117,944		5.28			114,961		5.15
Commercial loans, net		142,469		6.52			127,703		5.16
Consumer loans, net		118,105		6.50			93,472		5.49
Total loans, net		260,574		6.51			221,175		5.30
Loans held for sale		8,274		6.24			12,869		5.19
Other earning assets		5,966		8.04			10,139		4.58
Risk management derivatives		—		0.15			—		0.27
Total earning assets		442,527		6.15			421,047		5.27
Interest-bearing deposits		258,340		2.70			234,132		1.56
Federal funds purchased		50,087		4.07			51,395		2.46
Commercial paper		4,193		3.93			13,553		2.45
Securities sold short		8,520		3.01			12,681		3.25
Other short-term borrowings		7,214		2.26			6,370		1.63
Long-term debt		56,052		4.99			47,385		4.17
Risk management derivatives		—		0.16			—		0.14
Total interest-bearing liabilities		384,406		3.39			365,516		2.26
Net interest income and margin	$	3,539		3.21	%	$	3,474		3.31	%

Corporate Results of Operations

Net Interest Income and Margin Tax-equivalent net interest income increased 2 percent in the first quarter of 2006 from the first quarter of 2005, reflecting strong balance sheet growth. This growth offset compression in the net interest margin, which declined 10 basis points to 3.21 percent primarily due to the impact of a flattening yield curve. Also contributing to decline in the net interest margin were decreases driven by lower trading-related net interest income and the issuance of $2.5 billion of hybrid securities, as well as growth in lower spread loans and other assets despite the addition of higher spread consumer loans from the Westcorp merger. The average federal funds rate in the first

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quarter of 2006 was 199 basis points higher than the average for 2005, while the average longer-term two-year treasury note rate increased 116 basis points and the average 10-year treasury note rate increased 27 basis points.

In order to maintain our targeted interest rate risk profile, derivatives are often used to manage the interest rate risk inherent in our assets and liabilities. We routinely deploy hedging strategies designed to protect future net interest income. These strategies may reduce current income in the short-term, although we expect them to benefit future periods. In the first quarter of 2006, net interest rate risk management-related derivative income contributed $11 million to net interest income, representing a 1 basis point impact on our net interest margin, compared with $155 million, or 15 basis points, in the first quarter of 2005. The decline in the impact from derivatives largely reflects deposit growth, the effect of receive fixed/pay floating swaps in a rising rate environment, and greater use of cash securities instead of derivatives to maintain our relatively neutral interest rate risk position.

Fee and Other Income	Three Months Ended
	March 31,
(In millions)	2006			2005
Service charges	$	574			513
Other banking fees		428			351
Commissions		639			599
Fiduciary and asset management fees		745			714
Advisory, underwriting and other investment banking fees		302			233
Trading account profits		219			108
Principal investing		103			59
Securities losses		(48	)		(2	)
Other income		555			420
Total fee and other income	$	3,517			2,995

Fee and Other Income Fee and other income growth of 17 percent in the first quarter of 2006 from the same period in 2005 came in nearly every category, and reflected:

• Record service charges and other banking fees driven by strength in consumer activity, higher debit card interchange income on increased volume and higher rates, and higher commercial mortgage servicing income.

• 7 percent growth in commissions largely reflecting higher insurance activity.

• Improved fiduciary and asset management fees, despite the fourth quarter 2005 divestiture of our Corporate and Institutional Trust businesses, reflecting strong growth in brokerage managed account assets.

• Strong results in advisory and underwriting largely related to investment grade, loan syndications, structured products, and merger and acquisition advisory services.

• Stronger trading revenues reflecting increases in global rate products, credit products and equities, offset by a decline in structured products.

• Improved principal investing results on higher direct investment gains.

• Net securities losses of $48 million, which included net losses of $64 million in the corporate portfolio offset by gains of $16 million in our Corporate and Investment Bank related to corporate lending activities.

• Increased other income due to the $100 million MBNA termination fee, a $33 million gain related to the Archipelago/New York Stock Exchange merger, and $53 million of gains related to commercial mortgage securitization activity.

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Noninterest Expense	Three Months Ended
	March 31,
(In millions)	2006		2005
Salaries and employee benefits	$	2,697		2,401
Occupancy		275		250
Equipment		280		265
Advertising		47		44
Communications and supplies		167		162
Professional and consulting fees		167		127
Sundry expense		446		447
Other noninterest expense		4,079		3,696
Merger-related and restructuring expenses		68		61
Other intangible amortization		92		115
Total noninterest expense	$	4,239		3,872

Noninterest Expense Noninterest expense increased 9 percent in the first quarter of 2006 from the same period in 2005 largely reflecting the $98 million increase in employee stock compensation expense, which is included in salaries and employee benefits; the effect of acquisitions; and costs related to reentering the credit card business. The employee stock compensation expense increase was related to the implementation of a new share-based payment accounting standard, which applied to the General Bank, Corporate and Investment Bank, and Wealth Management annual stock awards in the first quarter of 2006. The increased expense is primarily due to the impact of awards granted to retirement-eligible employees, which are now expensed in full at the date of the grant rather than over the full contractual three- to five-year vesting period. We expect Capital Management’s annual stock awards to be granted in the second quarter of 2006. In addition, higher salaries and employee benefits reflected revenue-based incentives and strategic hiring, and included implementation costs related to the efficiency initiative.

Merger-Related and Restructuring Expenses Merger-related and restructuring expenses in the first quarter of 2006 of $68 million included $64 million related to the SouthTrust merger, which is now completed, and $4 million related to other acquisitions. In the first quarter of 2005, we recorded $61 million of these expenses relating to SouthTrust and the retail brokerage integration that was completed in the second quarter of 2005.

Business Segments

We provide a diversified range of banking and nonbanking financial services and products primarily through our four core business segments, the General Bank, Capital Management, Wealth Management, and the Corporate and Investment Bank.

Business segment data excludes merger-related and restructuring expenses, other intangible amortization, the gain on sale of discontinued operations and changes in accounting principle.

Business segment earnings are the primary measure of segment profit or loss we use to assess segment performance and to allocate resources. Economic profit, risk-adjusted return on capital (RAROC) and efficiency ratios are additional metrics, all of which are based on and calculated directly from segment earnings, that assist management in evaluating segment results.

We continuously update segment information for changes that occur in the management of our businesses. For example, in the first quarter of 2006, we transferred certain customer relationships and financial advisors to Wealth Management from Capital Management relating to a new investment platform in Wealth Management and have updated information for 2005 to reflect this and other changes. The impact to segment earnings in 2005 as a result of these changes was:

• A $26 million decrease in the General Bank.

• A $5 million increase in Capital Management.

• A $7 million decrease in Wealth Management.

• A $2 million decrease in the Corporate and Investment Bank.

• A $30 million increase in the Parent.

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General Bank	Three Months Ended
Performance Summary	March 31,
(Dollars in millions)	2006			2005
Income statement data
Net interest income (Tax-equivalent)	$	2,572			2,329
Fee and other income		872			684
Intersegment revenue		45			43
Total revenue (Tax-equivalent)		3,489			3,056
Provision for credit losses		62			57
Noninterest expense		1,677			1,543
Income taxes (Tax-equivalent)		638			534
Segment earnings	$	1,112			922
Performance and other data
Economic profit	$	866			686
Risk adjusted return on capital (RAROC)		58.28	%		50.57
Economic capital, average	$	7,431			7,033
Cash overhead efficiency ratio (Tax-equivalent)		48.06	%		50.48
Lending commitments	$	115,788			97,069
Average loans, net		178,358			159,641
Average core deposits	$	216,375			201,699
FTE employees		45,443			42,137

General Bank The General Bank includes our Retail and Small Business and Commercial lines of business.

The General Bank’s earnings rose 21 percent to $1.1 billion on record revenue, including strong fee and other income. Key General Bank trends in the first quarter of 2006 compared with the same period in 2005 included:

• 14 percent revenue growth reflected strengthening production in commercial and consumer loans, the $100 million termination fee and $87 million in net interest income from Westcorp.

• Commercial loan growth was driven by all business lines; consumer loan growth was led by strength in mortgage and home equity loans, partially offset by slowing growth in home equity lines.

• Deposit growth included strength in low-cost core deposits. Net new retail checking accounts increased by 187,000 in the first quarter of 2006, compared with an increase of 129,000 in the prior year first quarter.

• 27 percent growth in fee and other income also included strong debit card interchange income and growth in service charges. In addition, a larger mortgage servicing portfolio and higher mortgage originations contributed to growth.

• 9 percent growth in noninterest expense included higher personnel costs related to increased revenue-based incentive expense and employee stock compensation expense, as well as the impact of the Westcorp acquisition and costs related to reentering the credit card business.

• Continued improvement in the overhead efficiency ratio, despite our de novo branch initiative, due to merger efficiencies and strong expense management.

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Capital Management	Three Months Ended
Performance Summary	March 31,
(Dollars in millions)	2006			2005
Income statement data
Net interest income (Tax-equivalent)	$	198			152
Fee and other income		1,227			1,137
Intersegment revenue		(11	)		(11	)
Total revenue (Tax-equivalent)		1,414			1,278
Provision for credit losses		—			—
Noninterest expense		1,129			1,047
Income taxes (Tax-equivalent)		104			85
Segment earnings	$	181			146
Performance and other data
Economic profit	$	139			106
Risk adjusted return on capital (RAROC)		47.20	%		40.48
Economic capital, average	$	1,555			1,460
Cash overhead efficiency ratio (Tax-equivalent)		79.84	%		81.97
Lending commitments	$	237			148
Average loans, net		462			322
Average core deposits	$	28,671			30,632
FTE employees		17,107			17,851

Capital Management Capital Management includes Retail Brokerage Services, which includes retail brokerage and our annuity and reinsurance businesses, and Asset Management, which includes mutual funds, customized advisory services and defined benefit and defined contribution retirement services.

Capital Management grew earnings to $181 million on strong revenue growth. Key Capital Management trends in the first quarter of 2006 compared with the same period in 2005 included:

• 11 percent revenue growth driven by strength in retail brokerage managed account fees on 42 percent growth in managed assets to $119.8 billion. Momentum in building recurring revenue streams continued as this growth reflected strong client demand for managed accounts. Net interest income rose 30 percent as a result of improved deposit spreads.

• $1.2 billion in revenue from our retail brokerage businesses included transactional revenues of $501 million and recurring and other income of $697 million.

• $219 million in revenue from our asset management businesses, up $2 million, due to growth in equity assets partly offset by lower fixed income mutual fund assets.

• 8 percent growth in noninterest expense, including higher incentives and increased employee stock compensation expense.

Total Assets Under Management (AUM)	2006					2005
	First Quarter					Fourth Quarter					First Quarter
(In billions)	Amount		Mix			Amount		Mix			Amount		Mix
Equity	$	87		37	%	$	82		35	%	$	78		35	%
Fixed income		106		44			105		46			106		47
Money market		45		19			43		19			41		18
Total assets under management (a)	$	238		100	%	$	230		100	%	$	225		100	%
Securities lending		61		—			57		—			45		—
Total assets under management and securities lending	$	299		—		$	287		—		$	270		—

^(a) Includes $68 billion in assets managed for Wealth Management, which are also reported in that segment.

Mutual Funds (AUM also included in the above)	2006					2005
	First Quarter					Fourth Quarter					First Quarter
			Fund					Fund					Fund
(In billions)	Amount		Mix			Amount		Mix			Amount		Mix
Equity	$	34		36	%	$	32		35	%	$	29		33	%
Fixed income		23		24			23		25			25		28
Money market		38		40			37		40			34		39
Total mutual fund assets	$	95		100	%	$	92		100	%	$	88		100	%

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Total assets under management increased 4 percent from year-end 2005 to $238.3 billion, led by a 6 percent increase in equity assets to $87.3 billion. Total net inflows in assets under management were approximately $5 billion in the first quarter of 2006 while net asset appreciation was approximately $4 billion from increased market valuations. Total brokerage client assets grew 5 percent from year-end 2005 to $689.1 billion at March 31, 2006, excluding a $30 billion reduction in assets lost when a clearing client was acquired by another firm.

Wealth Management	Three Months Ended
Performance Summary	March 31,
(Dollars in millions)	2006			2005
Income statement data
Net interest income (Tax-equivalent)	$	149			140
Fee and other income		191			151
Intersegment revenue		1			2
Total revenue (Tax-equivalent)		341			293
Provision for credit losses		—			(1	)
Noninterest expense		250			196
Income taxes (Tax-equivalent)		33			37
Segment earnings	$	58			61
Performance and other data
Economic profit	$	41			45
Risk adjusted return on capital (RAROC)		42.87	%		52.55
Economic capital, average	$	516			442
Cash overhead efficiency ratio (Tax-equivalent)		73.21	%		67.16
Lending commitments	$	6,229			4,862
Average loans, net		15,526			12,829
Average core deposits	$	14,557			13,303
FTE employees		4,771			4,035

Wealth Management Wealth Management includes private banking, personal trust, investment advisory services, financial planning and insurance brokerage services (property and casualty, employee benefits and high net worth life for wealthy individuals, their families and businesses.)

Wealth Management’s earnings of $58 million declined 5 percent as higher expenses outpaced revenue growth. Key Wealth Management trends in the first quarter of 2006 compared with the same period in 2005 included:

• 16 percent revenue growth driven by 26 percent growth in fee and other income and a 6 percent increase in net interest income.

• Net interest income growth driven by a 21 percent increase in average loans, largely in commercial and consumer mortgage, and a 9 percent increase in average core deposits.

• Higher fee and other income reflecting increased commissions due to the May 2005 acquisition of Palmer & Cay, a commercial insurance brokerage firm, and modest growth in trust and investment management fees.

• 28 percent growth in noninterest expense including the impact of Palmer & Cay, higher revenue-based incentives, increased employee stock compensation expense and higher personnel expense related to the transition to a new investment platform.

• Growth in assets under management from year-end 2005 to $68.3 billion.

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Corporate and Investment Bank	Three Months Ended
Performance Summary	March 31,
(Dollars in millions)	2006			2005
Income statement data
Net interest income (Tax-equivalent)	$	506			590
Fee and other income		1,242			979
Intersegment revenue		(37	)		(34	)
Total revenue (Tax-equivalent)		1,711			1,535
Provision for credit losses		1			(3	)
Noninterest expense		888			733
Income taxes (Tax-equivalent)		303			299
Segment earnings	$	519			506
Performance and other data
Economic profit	$	332			344
Risk adjusted return on capital (RAROC)		33.66	%		38.45
Economic capital, average	$	5,941			5,082
Cash overhead efficiency ratio (Tax-equivalent)		51.90	%		47.77
Lending commitments	$	103,812			80,608
Average loans, net		42,903			36,515
Average core deposits	$	25,324			20,884
FTE employees		5,669			4,623

Corporate and Investment Bank Our Corporate and Investment Bank includes corporate lending, investment banking, and treasury and international trade finance.

The Corporate and Investment Bank generated earnings of $519 million on record revenue, reflecting strong investment banking results. Key Corporate and Investment Bank trends in the first quarter of 2006 compared with the same period in 2005 included:

• 11 percent revenue growth reflecting a 27 percent increase in fee and other income offsetting a 14 percent decline in net interest income.

• Net interest income declined primarily due to lower dividend income from equity trading and lower loan warehouse balances.

• The growth in fee income reflected strong investment banking results, primarily in trading, advisory and underwriting fees, and principal investing. Fee income also included $43 million in revenue from the issuance of corporate securities, which is eliminated in the Parent, and a $33 million gain related to the Archipelago/New York Stock Exchange merger. The first quarter of 2005 included a gain of $122 million from the sale of equity securities received in settlement of loans.

• A 21 percent increase in noninterest expense due primarily to higher variable compensation, investment in both revenue and efficiency projects, the impact of the Amnet and international correspondent banking acquisitions and increased employee stock compensation expense.

• Strong core deposit growth primarily from higher commercial mortgage servicing and international correspondent banking, and increased loans primarily reflecting higher large corporate loans and the acquisition of Union Bank of California’s international correspondent banking business.

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Parent	Three Months Ended
Performance Summary	March 31,
(Dollars in millions)	2006			2005
Income statement data
Net interest income (Tax-equivalent)	$	114			263
Fee and other income		(15	)		44
Intersegment revenue		2			—
Total revenue (Tax-equivalent)		101			307
Provision for credit losses		(2	)		(17	)
Noninterest expense		227			292
Minority interest		95			74
Income taxes (Tax-equivalent)		(123	)		(59	)
Segment earnings (loss)	$	(96	)		17
Performance and other data
Economic profit	$	(117	)		(3	)
Risk adjusted return on capital (RAROC)		(6.68	)%		10.41
Economic capital, average	$	2,677			2,784
Cash overhead efficiency ratio (Tax-equivalent)		134.94	%		57.65
Lending commitments	$	516			398
Average loans, net		23,325			11,868
Average core deposits	$	5,287			4,577
FTE employees		24,144			25,023

Parent Parent includes all asset and liability management functions, including managing our investment portfolio for liquidity and interest rate risk. Parent also includes goodwill and other intangible assets, and related funding costs, certain revenues and expenses that are not allocated to the business segments; the results of our HomEq Servicing business, which is responsible for home equity loan servicing, including that generated and retained by our mortgage company, as well as servicing for third party portfolios; and the results of wind-down or divested businesses, including the corporate and institutional trust (CIT) businesses that were sold in December 2005.

Key trends in the Parent segment in the first quarter of 2006 compared with the same period in 2005 included:

• Lower net interest income, reflecting reduced spreads on funding the securities portfolio and a lower contribution from hedge-related derivatives.

• A $59 million decrease in fee and other income reflecting the impact of the divested CIT businesses and increased intercompany fees that are eliminated, while the first quarter of 2005 included a gain of $38 million on the sale of a United Kingdom asset-based lending subsidiary.

• Net securities losses of $64 million compared with losses of $40 million in the year-ago period.

• A 22 percent decrease in noninterest expense, reflecting lower legal costs.

This segment reflects the impact of Prudential Financial’s 38 percent minority interest in Wachovia Securities Financial Holdings, LLC. Total minority interest expense, which also includes other subsidiaries, was $95 million in the first quarter of 2006 compared with $74 million in the first quarter of 2005.

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Balance Sheet Analysis

Securities Available For Sale
	March 31,			December 31,
(In billions)	2006			2005
Market value	$	118.8			114.9
Net unrealized loss	$	(1.8	)		(0.5	)
Memoranda (Market value)
Residual interests	$	0.8			0.9
Retained bonds
Investment grade (a)		4.9			5.1
Other		0.1			0.1
Total	$	5.0			5.2

    ^(a) Substantially all had credit ratings of AA and above.

Securities The increase in securities available for sale from December 31, 2005, reflects the Westcorp acquisition. Unrealized net securities losses in the first quarter of 2006 increased $1.3 billion due to the effect of higher rates primarily affecting our fixed rate mortgage-backed securities. The average duration of this portfolio increased to 3.8 years from 3.3 years due to the extension of mortgage-backed securities in the higher rate environment.

Included in securities available for sale at March 31, 2006, were residual interests with a market value of $825 million, which included a net unrealized gain of $228 million, and retained bonds from securitizations with a market value of $5.0 billion, which included a net unrealized gain of $36 million.

The Interest Rate Risk Management section further explains our interest rate risk management practices. The average rate earned on securities available for sale was 5.28 percent in the first quarter of 2006 and 5.15 percent in the first quarter of 2005.

Loans — On-Balance Sheet	2006		2005
	First		Fourth		Third		Second		First
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
Commercial
Commercial, financial and agricultural	$	89,138		87,327		83,241		80,528		78,669
Real estate — construction and other		14,483		13,972		13,653		13,216		12,713
Real estate — mortgage		20,066		19,966		19,864		19,724		20,707
Lease financing		25,238		25,368		25,022		24,836		25,013
Foreign		11,535		10,221		8,888		7,549		7,504
Total commercial		160,460		156,854		150,668		145,853		144,606
Consumer
Real estate secured		98,898		94,748		80,128		76,213		74,631
Student loans		10,555		9,922		11,458		10,828		10,795
Installment loans		20,189		6,751		6,745		6,783		6,808
Total consumer		129,642		111,421		98,331		93,824		92,234
Total loans		290,102		268,275		248,999		239,677		236,840
Unearned income		9,170		9,260		9,266		9,390		9,574
Loans, net (On-balance sheet)	$	280,932		259,015		239,733		230,287		227,266

Loans — Managed Portfolio (Including on-balance sheet)	2006		2005
	First		Fourth		Third		Second		First
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
Commercial	$	165,239		161,941		155,970		148,929		147,125
Real estate secured		114,803		110,299		106,261		102,761		98,161
Student loans		12,473		11,974		11,799		11,226		11,283
Installment loans		24,271		10,598		10,458		10,417		9,959
Total managed portfolio	$	316,786		294,812		284,488		273,333		266,528

Loans We have taken several steps to enhance loan growth with several small acquisitions and investments we expect will strengthen our loan portfolio mix with a greater proportion of consumer loans, including auto loans through our expanded dealer financial services network, direct issuance of credit cards and a renewed focus on mortgage loan originations through our bank branch network. In commercial lending, we have pursued risk reduction strategies in recent years to actively reduce potential problem loans and certain large corporate loans. We will continue to actively monitor loan quality and take proactive steps to reduce risk when warranted.

The increase in net loans from year-end 2005 included 2 percent growth in commercial loans, reflecting strength in middle-market commercial and large corporate lending, partially offset by lower lease financing. The 16 percent growth in consumer loans from year-end 2005 reflected the addition of $13.2

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billion in auto loans from Westcorp and increased consumer real estate-secured activity. Additionally, the increase reflected movement into fixed rate products, particularly in the home equity market.

Our loan portfolio is broadly diversified by industry, concentration and geography. Additionally, the portfolio is well collateralized:

• Commercial loans represented 55 percent and consumer loans 45 percent of the loan portfolio at March 31, 2006.

• 77 percent of the commercial loan portfolio is secured by collateral.

• 98 percent of the consumer loan portfolio is secured by collateral or guaranteed.

Of our $98.9 billion consumer real estate-secured loan portfolio:

• 74 percent is secured by a first lien.

• 69 percent has a loan-to-value ratio of 80 percent or less.

• 90 percent has a loan-to-value ratio of 90 percent or less.

• 46 percent is priced on a variable rate basis.

Our managed loan portfolio grew 7 percent from year-end 2005, reflecting the growth discussed above and real estate-secured securitizations. In addition, commercial mortgage warehouse activity is now reflected in loans held for sale.

Asset Quality	2006			2005
	First			Fourth			Third			Second			First
(In millions)	Quarter			Quarter			Quarter			Quarter			Quarter
Nonperforming assets
Nonaccrual loans	$	672			620			784			819			910
Foreclosed properties		108			100			112			138			132
Total nonperforming assets	$	780			720			896			957			1,042
as % of loans, net and foreclosed properties		0.28	%		0.28			0.37			0.42			0.46
Nonperforming assets in loans held for sale	$	24			32			59			111			159
Total nonperforming assets in loans and in loans held for sale	$	804			752			955			1,068			1,201
as % of loans, net, foreclosed properties and loans held for sale		0.28	%		0.28			0.37			0.44			0.50
Allowance for credit losses (a)
Allowance for loan losses, beginning of period	$	2,724			2,719			2,718			2,732			2,757
Balance of acquired entities at purchase date		300			—			—			—			—
Net charge-offs		(59	)		(51	)		(59	)		(51	)		(46	)
Allowance relating to loans acquired, transferred to loans held for sale or sold		12			(21	)		(26	)		(11	)		(13	)
Provision for credit losses related to loans transferred to loans held for sale or sold (b)		—			5			12			—			1
Provision for credit losses		59			72			74			48			33
Allowance for loan losses, end of period		3,036			2,724			2,719			2,718			2,732
Reserve for unfunded lending commitments, beginning of period		158			154			158			156			154
Provision for credit losses		2			4			(4	)		2			2
Reserve for unfunded lending commitments, end of period		160			158			154			158			156
Allowance for credit losses	$	3,196			2,882			2,873			2,876			2,888
Allowance for loan losses
as % of loans, net		1.08	%		1.05			1.13			1.18			1.20
as % of nonaccrual and restructured loans (c)		452			439			347			332			300
as % of nonperforming assets (c)		389			378			303			284			262
Allowance for credit losses
as % of loans, net		1.14	%		1.11			1.20			1.25			1.27
Net charge-offs	$	59			51			59			51			46
Commercial, as % of average commercial loans		0.05	%		0.03			0.05			0.03			—
Consumer, as % of average consumer loans		0.14			0.16			0.18			0.18			0.19
Total, as % of average loans, net		0.09	%		0.09			0.10			0.09			0.08
Past due loans, 90 days and over, and nonaccrual loans (c)
Commercial, as a % of loans, net		0.32	%		0.30			0.43			0.45			0.50
Consumer, as a % of loans, net		0.62	%		0.72			0.71			0.77			0.80

^(a) The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments.

^(b) The provision related to loans transferred or sold includes recovery of lower of cost or market losses.

^(c) These ratios do not include nonperforming assets included in loans held for sale.

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Nonperforming Assets Nonperforming assets increased 7 percent from year-end 2005, but remained a very low 0.28 percent of loans, foreclosed properties and loans held for sale. Nonaccrual loans increased $52 million, or 8 percent, from year-end 2005, primarily driven by two well-collateralized asset-based loans, and reflected sales of $2 million. New inflows to commercial nonaccrual loans were $147 million, up $30 million from year-end 2005. Impaired commercial loans were $426 million at March 31, 2006, up from $392 million at December 31, 2005.

Past Due Loans Accruing loans 90 days or more past due, excluding loans that are classified as loans held for sale, were $610 million at March 31, 2006, compared with $625 million at December 31, 2005. Of total past due loans, $50 million were commercial loans or commercial real estate loans and $560 million were consumer loans.

Net Charge-offs Annualized net charge-offs as a percentage of average net loans of 0.09 percent in the first quarter of 2006 were relatively stable with the first quarter of 2005. In the first quarter of 2006, commercial net charge-offs were $18 million, up $17 million from the first quarter of 2005, and consumer net charge-offs were $41 million, down $4 million from the first quarter of 2005. The low level of net charge-offs reflects strong underwriting standards and our strategic decision to actively manage down potential problem loans.

Provision for Credit Losses Our strategy is to mitigate risk and volatility on our balance sheet by actively monitoring and reducing potential problem loans, including the sale of at-risk credits when prudent. Provision expense rose $25 million from a low level in the first quarter of 2005, which reflected higher recoveries.

Allowance for Loan Losses and Reserve for Unfunded Lending Commitments The allowance for loan losses increased $312 million from year-end 2005 to $3.0 billion at March 31, 2006, primarily reflecting the addition of Westcorp. The reserve for unfunded lending commitments was $160 million at March 31, 2006, and $158 million at December 31, 2005. The reserve for unfunded lending commitments relates to commercial lending activity and is included in other liabilities.

Loans Held for Sale Loans held for sale include loans originated for sale or securitization as part of our core business strategy and the activities related to our ongoing portfolio risk management strategies to reduce exposure to areas of perceived higher risk. At March 31, 2006, and year-end 2005, core business activity, which includes residential and commercial mortgages and auto loans that we originate with the intent to sell to third parties, represented substantially all loans held for sale.

In the first quarter of 2006, we sold or securitized $11.4 billion in loans out of the loans held for sale portfolio, including $6.0 billion of commercial loans and $5.4 billion of consumer loans. None of the loans sold were nonperforming. In the first quarter of 2005, we sold or securitized $5.4 billion of loans out of the loans held for sale portfolio, including $2.0 billion of commercial loans and $3.4 billion of consumer loans. Of these loans, $6 million were nonperforming. We transferred $156 million of commercial loans and $13 million of related unfunded exposure to loans held for sale in the first quarter of 2005 as part of our portfolio management activities.

Goodwill In connection with acquisitions, we record purchase accounting adjustments to reflect the respective fair values of the assets and liabilities of acquired entities, as well as certain exit costs related to these mergers, which have the effect of increasing goodwill. Purchase accounting adjustments are preliminary and are subject to refinement for up to one year following consummation.

For the WestCorp acquisition, we recorded preliminary fair value and exit cost purchase accounting adjustments of $282 million ($171 million after tax). In addition, we recorded dealer relationship and deposit base intangibles amounting to $405 million ($253 million after tax). Based on a purchase price of $3.9 billion and WestCorp tangible stockholders’ equity of $1.9 billion, this resulted in goodwill of $1.6 billion at March 31, 2006.

15

Liquidity and Capital Adequacy

Core Deposits Core deposits increased slightly from year-end 2005 to $296.1 billion at March 31, 2006. Compared with the first quarter of 2005, average core deposits in the first quarter of 2006, which included $772 million related to Westcorp, increased 7 percent to $290.2 billion and average low-cost core deposits increased 4 percent to $243.9 billion. Average consumer certificates of deposit rose $2.8 billion from year-end 2005.

Purchased Funds Average purchased funds, which include wholesale borrowings with maturities of 12 months or less, were $94.1 billion in the first quarter of 2006 and $94.9 billion in the first quarter of 2005. Purchased funds were $87.9 billion at March 31, 2006, compared with $93.3 billion at December 31, 2005, as higher foreign and other time deposits were offset by the effect of greater use of long-term debt for funding rather than short-term borrowing.

Long-term Debt Long-term debt was $70.2 billion at March 31, 2006, and $49.0 billion at December 31, 2005, reflecting the addition of $13.0 billion of Westcorp debt and the issuance of $9.1 billion of attractively priced debt including $2.5 billion of WITS hybrid securities as noted below. In the rest of 2006, scheduled maturities of long-term debt amount to $12.5 billion. We anticipate either extending or replacing the maturing obligations.

The WITS transaction included a junior subordinated note and a forward contract for the sale of noncumulative perpetual preferred stock to a trust. The trust then issued $2.5 billion of securities to investors. The junior subordinated note qualifies as tier 1 capital.

Under our current shelf registration statement filed with the Securities and Exchange Commission, we have $18.0 billion of senior or subordinated debt securities, common stock or preferred stock available for issuance. In addition, we have available for issuance up to $7.5 billion under a medium-term note program covering senior or subordinated debt securities. Also, Wachovia Bank, National Association, has available a global note program for the issuance of up to $33.5 billion of senior or subordinated notes. In the first quarter of 2006, we issued $5.1 billion of subordinated bank notes under the global note program. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors.

Credit Line Wachovia Bank, National Association has a $1.9 billion committed back-up line of credit that expires in 2010. This credit facility contains a covenant that requires us to maintain a minimum level of adjusted total equity capital. We have not used this line of credit.

Dividend and Share Activity
	Three Months Ended
	March 31,
(In millions, except per share data)	2006		2005
Dividends	$	822		727
Dividends per common share	$	0.51		0.46
Common shares repurchased		38		20
Average diluted common shares outstanding		1,586		1,603

Stockholders’ Equity Stockholders’ equity increased 5 percent from year-end 2005 to $49.8 billion at March 31, 2006, including the $3.9 billion purchase of Westcorp; repurchases of 38 million common shares at a cost of $2.1 billion in connection with our share repurchase programs; and net depreciation in the securities portfolio. The higher level of share repurchases in the first quarter of 2006 compared with the first quarter of 2005 reflected opportunistic deployment of excess capital partially related to higher earnings. At March 31, 2006, we were authorized to buy back 85 million shares of common stock. Our 2005 Form 10-K has additional information related to share repurchases.

We adopted Statement of Financial Accounting Standards (SFAS) No. 156, Accounting for Servicing of Financial Assets, effective January 1, 2006, which is discussed further in Notes to Consolidated Financial Statements. Accordingly, we recorded a cumulative effect adjustment to beginning retained earnings of $64 million ($41 million after tax.)

16

Subsidiary Dividends Wachovia Bank, National Association, is the largest source of subsidiary dividends paid to the parent company. Capital requirements established by regulators limit dividends that this subsidiary and certain other of our subsidiaries can pay. Under these and other limitations, which include an internal requirement to maintain all deposit-taking banks at the well capitalized level, at March 31, 2006, our subsidiaries had $6.8 billion available for dividends that could be paid without prior regulatory approval. Our subsidiaries paid no dividends to the parent company in the first quarter of 2006.

Regulatory Capital Our capital ratios were above regulatory minimums in the first quarter of 2006 and we continued to be classified as well capitalized. The tier 1 capital ratio increased 37 basis points from December 31, 2005, to 7.87 percent, driven primarily by the addition of Westcorp and the issuance of securities noted above. Our total capital ratio was 11.45 percent and our leverage ratio was 6.86 percent at March 31, 2006, and 10.82 percent and 6.12 percent, respectively, at December 31, 2005.

Off-Balance Sheet Transactions

Summary of Off-Balance Sheet Exposures
	March 31, 2006				December 31, 2005
	Carrying				Carrying
(In millions)	Amount		Exposure		Amount		Exposure
Guarantees
Securities and other lending indemnifications	$	—		64,579		—		62,597
Standby letters of credit		110		35,222		108		35,568
Liquidity agreements		9		28,723		8		27,193
Loans sold with recourse		39		6,062		47		9,322
Residual value guarantees		—		1,111		—		1,109
Total guarantees	$	158		135,697		163		135,789

In the normal course of business, we engage in a variety of financial transactions that under GAAP either are not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying elements of market, credit and liquidity risk. The following discussion also includes retained interests from securitization transactions.

Retained Interests Retained interests from securitizations recorded as either available for sale securities, trading account assets or loans amounted to $6.4 billion at March 31, 2006, and at December 31, 2005.

Risk Governance and Administration

Market Risk Management We trade a variety of equities, debt securities, foreign exchange instruments and other derivatives to provide customized solutions for the risk management needs of our customers and for proprietary trading. Market risk is inherent in all these activities.

We use value-at-risk (VAR) methodology to assess market volatility over the most recent 252 trading days to estimate within a given level of confidence the maximum trading loss over a period of time that we would expect to incur from an adverse movement in market rates and prices over the period. We calculate 1-day VAR at the 97.5 percent and 99 percent confidence levels, and 10-day VAR at the 99 percent confidence level. The VAR model is supplemented by stress testing on a daily basis. The analysis captures all financial instruments that are considered trading positions. Our 1-day VAR limit in the first quarter of 2006 was $30 million. The total 1-day VAR was $17 million at March 31, 2006, and $18 million at December 31, 2005, and primarily related to interest rate risk and equity risk. The high, low and average VARs in the first quarter of 2006 were $20 million, $13 million and $15 million, respectively.

Interest Rate Risk Management One of the fundamental roles in banking is the management of interest rate risk, or the risk that changes in interest rates may diminish net interest income we

17

earn on loans, securities and other earning assets. The following discussion explains how we oversee the interest rate risk management process and describes the actions we take to protect earnings from interest rate risk.

A balance sheet is considered asset sensitive when its assets (loans and securities) reprice faster or to a greater extent than liabilities (deposits and borrowings). An asset-sensitive balance sheet will produce more net interest income when interest rates rise and less net interest income when interest rates decline. Our large and relatively rate-insensitive deposit base funds a portfolio of primarily floating rate commercial and consumer loans. This mix naturally creates a highly asset-sensitive balance sheet. Our focus on new customer acquisition and quality customer service has enabled us to generate deposit growth that has far outpaced loan growth, significantly adding to our naturally asset-sensitive position. To achieve more neutrality, we maintain a large portfolio of fixed rate discretionary instruments such as loans, securities and derivatives.

We analyze and manage the amount of risk we are taking to changes in interest rates by forecasting a wide range of interest rate scenarios for time periods as long as 36 months. In analyzing interest rate sensitivity for policy measurement, we compare forecasted earnings per share in both “high rate” and “low rate” scenarios to the “market forward rate.” The policy measurement period is 12 months in length, beginning with the first month of the forecast. Our objective is to ensure we prudently manage interest-bearing assets and liabilities in ways that improve financial performance without unduly putting earnings at risk. Our policy is to limit the risk we can take through balance sheet management actions to 5 percent of earnings per share in both falling and rising rate environments.

The “market forward rate” is constructed using currently implied market forward rate estimates for all points on the yield curve over the next 36 months. Our standard approach evaluates expected earnings in a 400 basis point range, or 200 basis points both above and below the “market forward rate” scenario. Our various scenarios together measure earnings volatility to a February 2007 federal funds rate ranging from 3.02 percent to 7.02 percent.

We simultaneously measure the impact of a parallel and nonparallel shift in rates on each of our interest rate scenarios. A parallel shift would, as the term implies, shift all points on the yield curve by the same increments. For example, by the twelfth month in our policy measurement period, short-term rates such as the federal funds rate would increase by 200 basis points over the “market forward rate,” while longer term rates such as the 10-year treasury note rate and 30-year treasury note rate would increase by 200 basis points as well. A nonparallel shift would consist of a 200 basis point increase in short-term rates, while long-term rates would increase by a different amount. A rate shift in which short-term rates rise to a greater degree than long-term rates is referred to as a “flattening” of the yield curve. Conversely long-term rates rising to a greater degree than short-term rates would lead to a steepening of the yield curve.

The impact of a nonparallel shift in rates depends on the types of assets in which funds are invested and the shape of the yield curve implicit in the “market forward rate” scenario. In the first half of 2004, the threat of rising rates, but uncertain timing, kept the yield curve very steep. Before the Federal Reserve’s Federal Open Market Committee’s tightening campaign began, our investment and hedging strategies were designed to manage both repricing risk and curve flattening that typically accompanies a rapid rise in short-term rates. Much of the anticipated flattening has occurred throughout 2004, 2005 and the first quarter of 2006. At March 31, 2006, the spread between the 10-year treasury note rate and the federal funds rate was 11 basis points, which is well below the long-term average of 123 basis points. While we still believe further flattening is possible, and we will continue to measure the impact of a nonparallel shift in rates, we feel the risk of earnings volatility due to further flattening has somewhat subsided.

Considering the balance of risks for 2006, we will focus primarily on managing the value created through our expanded deposit base as we protect the net interest margin against the pressures of

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rising short-term rates, and relative to 2005, a flatter yield curve. We expect to rely on our large base of low-cost core deposits to fund incremental investments in loans and securities. The characteristics of the loans we add will prompt different strategies. Fixed rate loans, for example, diminish the need to buy discretionary investments, so if more fixed rate loans were added to our loan portfolio, we would likely allow existing discretionary investments to mature or to be liquidated. If more variable rate loans were added to our loan portfolio, we would likely allow fixed rate securities to mature or to be liquidated, and then add new derivatives that, in effect, would convert the incremental variable rate loans to fixed rate loans.

Earnings Sensitivity The Policy Period Sensitivity Measurement table provides a summary of our interest rate sensitivity measurement.

Policy Period	Actual			Implied
Sensitivity Measurement	Fed Funds			Fed Funds		Percent
	Rate at			Rate at		Earnings
	March 31, 2006			February 28, 2007		Sensitivity
Market Forward Rate Scenarios (a)		4.52	%		5.02		—
High Rate Composite					7.02		(0.50	)
Low Rate			%		3.02		0.90

^(a) Assumes base federal funds rate mirrors market expectations.

Our model’s forward rate expectations imply an additional 50 basis points of tightening for the federal funds target rate by February 2007. If these expectations prove to be correct, the spread between the 10-year treasury note rate and the federal funds rate would compress from a positive 11 basis points of slope at March 31, 2006, to an inverted yield curve of negative 35 basis points of slope by February 2007. The current market expectations, therefore, do not reflect a yield curve shape consistent with a scenario where short-term rates rise an additional 200 basis points. Therefore, our high rate sensitivity to the “market forward rate” scenario is measured using three different yield curve shapes. These yield curves are constructed to represent the likely range of yield curve shapes that may prevail in an environment where short-term rates rise 200 basis points above current market expectations. The reported sensitivity is a composite of these three scenarios.

In March 2006, our earnings simulation model indicated earnings would be negatively affected by 0.5 percent in a “high rate composite” scenario relative to the “market forward rate” over the policy period. Additionally, we measure a scenario where short-term rates gradually decline 200 basis points over a 12-month period while the longer-term 10-year treasury note and 30-year treasury note rates decline by less than 200 basis points relative to the “market forward rate” scenario. The model indicates earnings would be positively affected by 0.9 percent in this scenario.

While our interest rate sensitivity modeling assumes management takes no action, we regularly assess the viability of strategies to reduce unacceptable risks to earnings and we implement such strategies when we believe those actions are prudent. As new monthly outlooks become available, we formulate strategies aimed at protecting earnings from the potential negative effects of changes in interest rates.

Accounting and Regulatory Matters

The following information addresses significant new developments in accounting standard setting that will affect us, as well as new or proposed legislation that will continue to have a significant impact on our industry.

Leveraged Lease Accounting As previously disclosed, the FASB has been discussing several matters relating to leveraged lease accounting. Currently, SFAS No. 13, Accounting for Leases, as amended and interpreted, states that if a change in an important lease assumption changes the total estimated net income under the lease, then a recalculation of the net investment in the leveraged lease must occur. The FASB has issued a proposed FASB Staff Position (FSP) that would amend SFAS 13 to provide that changes affecting the timing of cash flows but not the total net income under a leveraged lease will also trigger a recalculation of the lease. Under the proposed

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FSP, recalculations affecting existing leveraged leases would result in a one-time noncash charge to be recorded as a cumulative effect of a change in accounting principle on the date of adoption. The FASB has indicated the effective date will be January 1, 2007. The proposed FSP provides that amounts would be recognized as income over the remaining terms of the affected leases, which in the aggregate would approximate the amount of the charge initially recorded. The proposed FSP was subject to a comment period, is currently being deliberated by the FASB, and the provisions and effective date of the proposed FSP are subject to change. We cannot predict with certainty what the final FSP will provide.

We have two broad classes of leveraged lease transactions that would be affected if the final FSP is the same as the proposed FSP: Lease-In, Lease-Out transactions (LILOs) and a second group of transactions that the Internal Revenue Service (IRS) broadly refers to as Sale-In, Lease-Out transactions (SILOs). SILOs principally include service contract and qualified technological equipment leases. As previously disclosed, in 2004 Wachovia and the IRS settled all issues relating to the IRS’s challenge of the tax position on LILOs entered into by First Union Corporation and legacy Wachovia Corporation. The resolution of these LILO issues led to a change in the timing of cash flows under the lease transactions. Accordingly, if the FSP is finalized as proposed and based on our interpretation of the proposed FSP, we currently estimate we would be required to recognize a one-time after-tax noncash charge for LILOs between $500 million and $800 million on the effective date of the final FSP. Under the proposed FSP, this amount would be recorded as a cumulative effect of a change in accounting principle and would be recognized as income over the remaining terms of the affected LILOs. Retrospective restatement of prior periods is not permitted under the proposed FSP. Assuming the final FSP is the same as the proposed FSP, we currently estimate that the amounts to be recognized as income over the remaining terms of the affected LILOs would not have a material impact to our earnings per share in future periods. In addition, we also believe the recognition of the one-time noncash charge for LILOs would not have an impact on our financial outlook for 2006 as described in the Outlook section.

The proposed FSP may also affect our SILOs. The IRS has announced its intention to challenge the industry-wide tax treatment of SILOs. We believe our tax treatment of SILOs is consistent with well-established tax law and it is probable we would prevail if litigation were to become necessary. However, assuming the final FSP and the final FASB Interpretation relating to uncertain tax positions discussed below are finalized as proposed, and in the event we were unable to meet the recognition threshold of the FASB Interpretation, we might incur a material one-time noncash charge for SILOs. This one-time charge for SILOs would be recorded as a cumulative effect of a change in accounting principle and an amount approximating the charge would be recognized as income over the remaining life of the affected SILOs. We are currently unable to predict with certainty the financial impact, if any, of a one-time charge for SILOs.

Income Taxes The FASB has issued a proposed FASB Interpretation, Uncertain Tax Positions, to clarify the criteria for recognition of income tax benefits in accordance with SFAS No. 109, Accounting for Income Taxes. Under the FASB proposal, a company would recognize in its financial statements its best estimate of the benefit associated with a tax position only if it is considered “more likely than not,” as defined in SFAS No. 5, Accounting for Contingencies, of being sustained on audit based solely on the technical merits of the tax position. The FASB has indicated the effective date will be January 1, 2007. Implementation of the final Interpretation will occur through a cumulative effect of a change in accounting principle to be recorded upon the initial adoption. We are currently analyzing the proposed Interpretation and have not determined its potential impact on our consolidated financial position or results of operations. The proposed Interpretation was subject to a comment period, is currently being deliberated by the FASB, and is subject to change. We cannot predict with certainty what the final Interpretation will provide.

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Financial Instruments The FASB has an ongoing project addressing the accounting for the transfer and retention of financial instruments. As part of this project, the FASB issued two statements in the first quarter of 2006, SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which is discussed below, and SFAS No. 156, which we implemented effective January 1, 2006, and is discussed in Notes to Consolidated Financial Statements. The FASB has also issued an exposure draft that would amend SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, and which they expect to finalize in 2007. This amendment would revise or clarify the criteria for derecognition of financial assets after a transfer, and change the recognition method at the date of transfer for certain retained positions to fair value from an allocated carrying amount. We cannot predict with certainty what the final amendment will provide.

In addition, we transfer commercial mortgage loans to trusts that issue various classes of securities backed by the loans (CMBS) to investors. Recently, the FASB has initiated a project regarding securitization structures that use a QSPE, including CMBS transactions, and the related servicing activities. The FASB is considering the need for clarifying guidance, which may result in changes to the structure of and/or the accounting for these transactions and potentially transfers of other asset classes. We cannot predict with certainty whether any guidance will be issued or what the transition provisions for implementing the guidance will be.

Hybrid Financial Instruments SFAS No. 155 amends SFAS No. 133, Accounting for Derivatives and Hedging Activity, and SFAS No. 140. Hybrid financial instruments are financial instruments that contain an embedded derivative within a single instrument. SFAS 155 permits entities an option to elect to record hybrid financial instruments at fair value as one financial instrument. Prior to this amendment, hybrid financial instruments were required to be separated into two instruments, a derivative and host, and generally only the derivative was recorded at fair value. SFAS 155 requires that beneficial instruments in securitized assets be evaluated for derivatives, either freestanding or embedded. SFAS 155 is effective for all financial instruments acquired or issued after January 1, 2007. Additionally, SFAS 155 provides a one-time opportunity to apply the fair value election to hybrid financial instruments existing at the date of implementation at fair value as one financial instrument, with any difference between the carrying amount of the existing hybrid financial instruments and the fair value of the single financial instrument being recorded as a cumulative effect adjustment to beginning retained earnings. We are currently assessing the impact of SFAS 155 on our consolidated financial position and results of operations.

Business Combinations In June 2005, the FASB issued a Proposed Statement, Business Combinations, which would replace SFAS No. 141, Business Combinations. While the Proposed Statement retains many of the current fundamental concepts, including the purchase method of accounting, it proposes changes in several areas. Under the Proposed Statement, consideration paid in a business combination would be measured at fair value, with fair value determined on the consummation date, rather than on announcement date, as is the current practice. Additionally, fair value would include obligations for contingent consideration and would exclude transaction costs, which would be recorded as expenses when incurred. Currently, contingent consideration is not recorded until payment is probable and transaction costs are included in determination of the purchase price. Also, loans would be recorded at fair value, reflecting both interest rate and credit factors, and the acquiree’s allowance for loan losses would no longer be carried forward. The Proposed Statement would be effective for business combinations that consummate beginning in 2007. The Proposed Statement was subject to a 120-day comment period and is being followed by final deliberations by the FASB, and therefore, is subject to change. We cannot predict with certainty what the final Statement will provide.

Pension and Other Postretirement Plans In March 2006, the FASB issued a Proposed Statement to amend several existing Statements that address employers’ accounting and reporting for defined benefit pension and other postretirement plans. The Proposed Statement represents the

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initial phase of a comprehensive project on employers’ accounting for these plans. The Proposed Statement changes the presentation requirements for assets and liabilities relating to these plans, and requires recognition of prepaid or accrued pension cost as the overfunded or underfunded status of the plans, measured solely as the difference between the fair value of the plan assets and the benefit obligation. Unrecognized actuarial gains and losses and unrecognized prior service costs, which have previously been recorded as part of the prepaid or accrued pension cost, would be included as a component of accumulated other comprehensive income. Actuarial gains and losses and prior service costs and credits that arise during a period would be included in other comprehensive income to the extent they are not included in net periodic pension cost (a component of salaries and employee benefits expense for us). Upon implementation of the Proposed Statement, we would be required to record a reduction of equity for the after-tax amounts of unrecognized actuarial losses and prior service costs at that date. At December 31, 2005, this amounted to $1.9 billion before taxes, or $1.2 billion after tax. The Proposed Statement also requires that employers use a plan measurement date that is the same as its fiscal year-end. We have historically used a measurement date of September 30, and will be required to change to a December 31 measurement date upon implementation of the Proposed Statement. The Proposed Statement is subject to a comment period, to be followed by final deliberations by the FASB, and the provisions and effective date of the Proposed Statement are subject to change. Information regarding our pension and other postretirement plans can be found in the Notes to Consolidated Financial Statements in our 2005 Annual Report on Form 10-K.

Regulatory Matters Various legislative and regulatory proposals concerning the financial services industry are pending in Congress, the legislatures in states in which we conduct operations and before various regulatory agencies that supervise our operations. Given the uncertainty of the legislative and regulatory process, we cannot assess the impact of any such legislation or regulations on our consolidated financial position or results of operations. For a more detailed description of the laws and regulations governing our business operations, please see our 2005 Annual Report on Form 10-K.

In June 2004, the Basel Committee on Bank Supervision published new international guidelines for determining regulatory capital. The U.S. regulators recently issued proposed regulations representing their interpretation of the new Basel guidelines. Under the proposed regulations, we will be required to determine regulatory capital under new methodologies, in parallel with the existing capital rules, beginning in 2008. In 2009, we will determine regulatory capital solely under the new rules, which include certain required minimum levels in 2009 through 2011. The new regulations will result in regulatory capital that would be more risk sensitive than under the current framework, and represent a significant implementation effort for us to be in compliance with the new regulations. The necessary project management infrastructure and funding have been established to ensure we will fully comply with the new regulations.

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Table 1
EXPLANATION OF OUR USE OF NON-GAAP FINANCIAL MEASURES

     In addition to the results of operations presented in accordance with U.S. generally accepted accounting principles (GAAP), our management uses certain non-GAAP financial measures, such as expenses excluding merger-related and restructuring expenses; the dividend payout ratio on a basis that excludes other intangible amortization, merger-related and restructuring expenses, discontinued operations and the cumulative effect of a change in accounting principle; and net interest income on a tax-equivalent basis.

     We believe these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance and our business and performance trends, and they facilitate comparisons with the performance of others in the financial services industry. Specifically, we believe the exclusion of merger-related and restructuring expenses permits evaluation and comparison of results for ongoing business operations, and it is on this basis that our management internally assesses our performance. Those non-operating items also are excluded from our 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. For additional information regarding segment performance, see the Business Segments section and Note 5 to Notes to Consolidated Financial Statements. This quarterly financial supplement contains information regarding estimates of our future expenses excluding merger-related and restructuring expenses. The amount and timing of those future merger-related and restructuring expenses, however, are not estimable until such expenses actually occur, and therefore, reconciliation information relating to those future expenses and GAAP expenses has not been provided.

     In addition, because of the significant amount of deposit base intangible amortization, we believe the exclusion of this expense provides investors with consistent and meaningful comparisons to other financial service firms. Also, our management makes recommendations to our board of directors about dividend payments based on reported earnings excluding other intangible amortization, merger-related and restructuring expenses, 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. We believe this dividend payout ratio is useful to investors because it provides investors with a better understanding of and permits investors to monitor our dividend payout policy.

     This quarterly financial supplement also includes net interest income on a tax-equivalent basis. We believe 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 practice.

     Although we believe that the above mentioned non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The reconciliation of these non-GAAP financial measures from GAAP to non-GAAP is presented below.

	Three Months Ended
	March 31,
(In millions, except per share data)	2006			2005
Net interest income (GAAP)	$	3,490			3,413
Tax-equivalent adjustment		49			61
Net interest income (Tax-equivalent)	$	3,539			3,474
DIVIDEND PAYOUT RATIOS ON COMMON SHARES
Diluted earnings per common share (GAAP)	$	1.09			1.01
Other intangible amortization		0.04			0.05
Merger-related and restructuring expenses		0.03			0.02
Earnings per share (a)	$	1.16			1.08
Dividends paid per common share	$	0.51			0.46
Dividend payout ratios (GAAP) (b)		46.79	%		45.54
Dividend payout ratios (a) (b)		43.97	%		42.59

(a)	Excludes other intangible amortization, and merger-related and restructuring expenses.
(b)	Dividend payout ratios are determined by dividing dividends per common share by earnings per common share.

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Table 2
SELECTED STATISTICAL DATA

	2006			2005
	First			Fourth		Third		Second		First
(Dollars in millions, except per share data)	Quarter			Quarter		Quarter		Quarter		Quarter
PROFITABILITY
Return on average common stockholders’ equity		14.62	%		14.60		13.95		14.04		13.92
Net interest margin (a)		3.21			3.25		3.18		3.23		3.31
Fee and other income as % of total revenue		49.84			45.55		48.63		46.60		46.30
Effective income tax rate		33.84	%		34.10		32.21		32.02		33.42
ASSET QUALITY
Allowance for loan losses as % of loans, net		1.08	%		1.05		1.13		1.18		1.20
Allowance for loan losses as % of nonperforming assets (b)		389			378		303		284		262
Allowance for credit losses as % of loans, net		1.14			1.11		1.20		1.25		1.27
Net charge-offs as % of average loans, net		0.09			0.09		0.10		0.09		0.08
Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale		0.28	%		0.28		0.37		0.44		0.50
CAPITAL ADEQUACY
Tier 1 capital ratio		7.87	%		7.50		7.42		7.85		7.91
Total capital ratio		11.45			10.82		10.79		11.25		11.40
Leverage		6.86	%		6.12		5.96		6.10		5.99
OTHER DATA
FTE employees		97,134			93,980		92,907		93,385		93,669
Total financial centers/brokerage offices		3,889			3,850		3,840		3,825		3,970
ATMs		5,179			5,119		5,119		5,089		5,234
Actual common shares (In millions)		1,608			1,557		1,553		1,577		1,576
Common stock price	$	56.05			52.86		47.59		49.60		50.91
Market capitalization	$	90,156			82,291		73,930		78,236		80,256

(a)	Tax-equivalent.
(b)	These ratios do not include nonperforming loans included in loans held for sale.

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Table 3
SUMMARIES OF INCOME, PER COMMON SHARE AND BALANCE SHEET DATA

	2006			2005
	First			Fourth			Third		Second		First
(In millions, except per share data)	Quarter			Quarter			Quarter		Quarter		Quarter
SUMMARIES OF INCOME
Interest income	$	6,707			6,490			6,044		5,702		5,453
Tax-equivalent adjustment		49			52			53		53		61
Interest income (a)		6,756			6,542			6,097		5,755		5,514
Interest expense		3,217			2,967			2,657		2,344		2,040
Net interest income (a)		3,539			3,575			3,440		3,411		3,474
Provision for credit losses		61			81			82		50		36
Net interest income after provision for credit losses (a)		3,478			3,494			3,358		3,361		3,438
Securities gains (losses)		(48	)		(74	)		29		136		(2	)
Fee and other income		3,565			3,063			3,229		2,841		2,997
Merger-related and restructuring expenses		68			58			83		90		61
Other noninterest expense		4,171			4,125			3,921		3,698		3,811
Minority interest in income of consolidated subsidiaries		95			103			104		71		64
Income from continuing operations before income taxes (a)		2,661			2,197			2,508		2,479		2,497
Income taxes		884			652			790		776		815
Tax-equivalent adjustment		49			52			53		53		61
Income from continuing operations		1,728			1,493			1,665		1,650		1,621
Discontinued operations, net of income taxes		—			214			—		—		—
Net income	$	1,728			1,707			1,665		1,650		1,621
PER COMMON SHARE DATA
Basic earnings
Income from continuing operations	$	1.11			0.97			1.07		1.05		1.03
Net income		1.11			1.11			1.07		1.05		1.03
Diluted earnings
Income from continuing operations		1.09			0.95			1.06		1.04		1.01
Net income		1.09			1.09			1.06		1.04		1.01
Cash dividends	$	0.51			0.51			0.51		0.46		0.46
Average common shares — Basic		1,555			1,541			1,549		1,564		1,571
Average common shares — Diluted		1,586			1,570			1,575		1,591		1,603
Average common stockholders’ equity
Quarter-to-date	$	47,926			46,407			47,328		47,114		47,231
Year-to-date		47,926			47,019			47,225		47,172		47,231
Book value per common share		30.95			30.55			30.10		30.37		29.48
Common stock price
High		57.69			55.13			51.34		53.07		56.01
Low		51.09			46.49			47.23		49.52		49.91
Period-end	$	56.05			52.86			47.59		49.60		50.91
To earnings ratio (b)		13.10	X		12.59			11.72		12.53		13.16
To book value		181	%		173			158		163		173
BALANCE SHEET DATA
Assets	$	541,842			520,755			532,381		511,840		506,833
Long-term debt	$	70,218			48,971			45,846		49,006		47,932

(a)	Tax-equivalent.
(b)	Based on diluted earnings per common share.

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Table 4
MERGER—RELATED AND RESTRUCTURING EXPENSES

	Three
	Months
	Ended
	March 31,
(In millions)	2006
MERGER—RELATED AND RESTRUCTURING EXPENSES — WACHOVIA/SOUTHTRUST
Personnel costs	$	37
Occupancy and equipment		11
Advertising		1
System conversion costs		7
Other		8
Total Wachovia/SouthTrust merger—related and restructuring expenses		64
Other merger—related and restructuring expenses		4
Total merger—related and restructuring expenses	$	68

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Table 5
BUSINESS SEGMENTS (a)

	2006			2005
	First			Fourth		Third		Second		First
(Dollars in millions)	Quarter			Quarter		Quarter		Quarter		Quarter
GENERAL BANK COMBINED (b)
Net interest income (c)	$	2,572			2,500		2,415		2,386		2,329
Fee and other income		872			745		760		687		684
Intersegment revenue		45			57		56		49		43
Total revenue (c)		3,489			3,302		3,231		3,122		3,056
Provision for credit losses		62			75		77		68		57
Noninterest expense		1,677			1,669		1,583		1,513		1,543
Income taxes		628			561		567		557		525
Tax-equivalent adjustment		10			10		10		9		9
Segment earnings	$	1,112			987		994		975		922
Economic profit	$	866			759		768		746		686
Risk adjusted return on capital		58.28	%		53.32		54.23		53.94		50.57
Economic capital, average	$	7,431			7,113		7,048		6,969		7,033
Cash overhead efficiency ratio (c)		48.06	%		50.53		49.01		48.47		50.48
Lending commitments	$	115,788			111,202		106,570		102,768		97,069
Average loans, net		178,358			168,979		163,905		161,931		159,641
Average core deposits	$	216,375			213,310		208,472		205,662		201,699
FTE employees		45,443			42,115		41,491		41,343		42,137
COMMERCIAL
Net interest income (c)	$	871			818		783		776		760
Fee and other income		112			101		106		104		115
Intersegment revenue		31			43		41		33		29
Total revenue (c)		1,014			962		930		913		904
Provision for credit losses		22			21		22		11		4
Noninterest expense		361			325		318		296		319
Income taxes		220			215		208		213		204
Tax-equivalent adjustment		10			10		10		9		9
Segment earnings	$	401			391		372		384		368
Economic profit	$	245			250		233		241		220
Risk adjusted return on capital		35.50	%		37.62		36.16		37.59		35.40
Economic capital, average	$	4,051			3,725		3,680		3,629		3,660
Cash overhead efficiency ratio (c)		35.59	%		33.74		34.24		32.40		35.31
Average loans, net	$	89,223			82,148		79,529		78,719		76,926
Average core deposits	$	46,622			47,295		45,415		45,267		45,332
RETAIL AND SMALL BUSINESS
Net interest income (c)	$	1,701			1,682		1,632		1,610		1,569
Fee and other income		760			644		654		583		569
Intersegment revenue		14			14		15		16		14
Total revenue (c)		2,475			2,340		2,301		2,209		2,152
Provision for credit losses		40			54		55		57		53
Noninterest expense		1,316			1,344		1,265		1,217		1,224
Income taxes		408			346		359		344		321
Tax-equivalent adjustment		—			—		—		—		—
Segment earnings	$	711			596		622		591		554
Economic profit	$	621			509		535		505		466
Risk adjusted return on capital		85.58	%		70.58		73.98		71.72		67.02
Economic capital, average	$	3,380			3,388		3,368		3,340		3,373
Cash overhead efficiency ratio (c)		53.16	%		57.44		54.97		55.11		56.85
Average loans, net	$	89,135			86,831		84,376		83,212		82,715
Average core deposits	$	169,753			166,015		163,057		160,395		156,367

(a)	Certain amounts presented in this Table 5 in periods prior to the first quarter of 2006 have been reclassified to conform to the presentation in the first quarter of 2006.
(b)	General Bank Combined represents the consolidation of the General Bank’s Commercial, and Retail and Small Business lines of business.
(c)	Tax-equivalent.

(Continued)

27

Table 5
BUSINESS SEGMENTS

	2006			2005
	First			Fourth			Third			Second			First
(Dollars in millions)	Quarter			Quarter			Quarter			Quarter			Quarter
CAPITAL MANAGEMENT COMBINED (a)
Net interest income (b)	$	198			178			159			147			152
Fee and other income		1,227			1,166			1,146			1,136			1,137
Intersegment revenue		(11	)		(9	)		(12	)		(12	)		(11	)
Total revenue (b)		1,414			1,335			1,293			1,271			1,278
Provision for credit losses		—			—			—			—			—
Noninterest expense		1,129			1,103			1,061			1,043			1,047
Income taxes		104			85			85			83			85
Tax-equivalent adjustment		—			—			1			—			—
Segment earnings	$	181			147			146			145			146
Economic profit	$	139			105			107			105			106
Risk adjusted return on capital		47.20	%		38.95			40.28			40.36			40.48
Economic capital, average	$	1,555			1,496			1,444			1,439			1,460
Cash overhead efficiency ratio (b)		79.84	%		82.61			82.09			82.02			81.97
Lending commitments	$	237			208			184			176			148
Average loans, net		462			388			372			344			322
Average core deposits	$	28,671			28,328			28,521			29,235			30,632
FTE employees		17,107			17,295			17,310			17,444			17,851
Assets under management	$	238,305			229,631			233,113			225,350			224,723
ASSET MANAGEMENT
Net interest income (b)	$	2			3			2			2			2
Fee and other income		217			216			211			214			215
Intersegment revenue		—			—			—			(1	)		—
Total revenue (b)		219			219			213			215			217
Provision for credit losses		—			—			—			—			—
Noninterest expense		181			203			180			176			173
Income taxes		14			7			12			14			16
Tax-equivalent adjustment		—			—			—			—			—
Segment earnings	$	24			9			21			25			28
Economic profit	$	18			3			15			20			22
Risk adjusted return on capital		45.24	%		16.71			39.86			50.91			54.34
Economic capital, average	$	219			226			204			203			206
Cash overhead efficiency ratio (b)		82.49	%		93.10			84.82			81.15			79.87
Average loans, net	$	28			13			18			10			19
Average core deposits	$	258			220			214			195			207

(a)	Capital Management Combined represents the consolidation of Capital Management’s Asset Management, Retail Brokerage Services, and Other, which primarily serves to eliminate intersegment revenue.
(b)	Tax-equivalent.

(Continued)

28

Table 5
BUSINESS SEGMENTS

	2006			2005
	First			Fourth			Third			Second			First
(Dollars in millions)	Quarter			Quarter			Quarter			Quarter			Quarter
RETAIL BROKERAGE SERVICES
Net interest income (b)	$	196			175			157			144			150
Fee and other income		1,013			953			937			925			926
Intersegment revenue		(11	)		(9	)		(11	)		(11	)		(11	)
Total revenue (b)		1,198			1,119			1,083			1,058			1,065
Provision for credit losses		—			—			—			—			—
Noninterest expense		953			905			885			872			880
Income taxes		89			78			73			67			69
Tax-equivalent adjustment		—			—			1			—			—
Segment earnings	$	156			136			124			119			116
Economic profit	$	120			100			91			84			82
Risk adjusted return on capital		47.17	%		42.46			39.92			38.23			37.69
Economic capital, average	$	1,336			1,270			1,240			1,236			1,254
Cash overhead efficiency ratio (b)		79.56	%		80.81			81.79			82.42			82.68
Average loans, net	$	434			375			354			334			303
Average core deposits	$	28,413			28,108			28,307			29,040			30,425
OTHER
Net interest income (b)	$	—			—			—			1			—
Fee and other income		(3	)		(3	)		(2	)		(3	)		(4	)
Intersegment revenue		—			—			(1	)		—			—
Total revenue (b)		(3	)		(3	)		(3	)		(2	)		(4	)
Provision for credit losses		—			—			—			—			—
Noninterest expense		(5	)		(5	)		(4	)		(5	)		(6	)
Income taxes		1			—			—			2			—
Tax-equivalent adjustment		—			—			—			—			—
Segment earnings	$	1			2			1			1			2
Economic profit	$	1			2			1			1			2
Risk adjusted return on capital		—	%		—			—			—			—
Economic capital, average	$	—			—			—			—			—
Cash overhead efficiency ratio (b)		—	%		—			—			—			—
Average loans, net	$	—			—			—			—			—
Average core deposits	$	—			—			—			—			—

(Continued)

29

Table 5
BUSINESS SEGMENTS

	2006			2005
	First			Fourth		Third		Second		First
(Dollars in millions)	Quarter			Quarter		Quarter		Quarter		Quarter
WEALTH MANAGEMENT
Net interest income (a)	$	149			153		147		143		140
Fee and other income		191			193		196		188		151
Intersegment revenue		1			2		1		1		2
Total revenue (a)		341			348		344		332		293
Provision for credit losses		—			1		6		—		(1	)
Noninterest expense		250			254		240		227		196
Income taxes		33			35		35		38		37
Tax-equivalent adjustment		—			—		—		—		—
Segment earnings	$	58			58		63		67		61
Economic profit	$	41			42		49		50		45
Risk adjusted return on capital		42.87	%		43.18		49.53		52.24		52.55
Economic capital, average	$	516			508		503		488		442
Cash overhead efficiency ratio (a)		73.21	%		73.32		69.61		68.10		67.16
Lending commitments	$	6,229			5,840		5,574		5,154		4,862
Average loans, net		15,526			14,848		14,161		13,581		12,829
Average core deposits	$	14,557			14,222		13,457		13,330		13,303
FTE employees		4,771			4,808		4,816		4,849		4,035

(a) Tax-equivalent.

(Continued)

30

Table 5
BUSINESS SEGMENTS

	2006			2005
	First			Fourth			Third			Second			First
(Dollars in millions)	Quarter			Quarter			Quarter			Quarter			Quarter
CORPORATE AND INVESTMENT BANK COMBINED (a)
Net interest income (b)	$	506			587			531			520			590
Fee and other income		1,242			900			1,027			789			979
Intersegment revenue		(37	)		(51	)		(44	)		(40	)		(34	)
Total revenue (b)		1,711			1,436			1,514			1,269			1,535
Provision for credit losses		1			(13	)		(3	)		(8	)		(3	)
Noninterest expense		888			787			810			711			733
Income taxes		281			223			242			184			271
Tax-equivalent adjustment		22			23			21			27			28
Segment earnings	$	519			416			444			355			506
Economic profit	$	332			226			263			177			344
Risk adjusted return on capital		33.66	%		27.02			29.77			24.14			38.45
Economic capital, average	$	5,941			5,613			5,559			5,390			5,082
Cash overhead efficiency ratio (b)		51.90	%		54.76			53.51			56.02			47.77
Lending commitments	$	103,812			103,079			92,966			88,365			80,608
Average loans, net		42,903			41,527			38,796			37,827			36,515
Average core deposits	$	25,324			25,877			24,735			22,439			20,884
FTE employees		5,669			5,796			4,799			4,845			4,623
CORPORATE LENDING
Net interest income (b)	$	198			210			215			217			235
Fee and other income		161			108			111			102			244
Intersegment revenue		7			7			6			5			6
Total revenue (b)		366			325			332			324			485
Provision for credit losses		1			(25	)		(3	)		(9	)		(3	)
Noninterest expense		106			93			111			104			107
Income taxes		98			97			86			88			143
Tax-equivalent adjustment		—			—			—			—			—
Segment earnings	$	161			160			138			141			238
Economic profit	$	54			39			31			35			142
Risk adjusted return on capital		17.73	%		15.98			14.97			15.70			31.72
Economic capital, average	$	3,249			3,080			3,094			2,975			2,788
Cash overhead efficiency ratio (b)		29.06	%		28.63			33.54			32.03			22.02
Average loans, net	$	30,738			30,364			29,415			28,874			28,002
Average core deposits	$	154			228			356			419			528

(a)	Corporate and Investment Bank Combined represents the consolidation of the Corporate and Investment Bank’s Corporate Lending, Treasury and International Trade Finance, and Investment Banking lines of business.
(b)	Tax-equivalent.

(Continued)

31

Table 5
BUSINESS SEGMENTS

	2006			2005
	First			Fourth			Third			Second			First
(Dollars in millions)	Quarter			Quarter			Quarter			Quarter			Quarter
TREASURY AND INTERNATIONAL TRADE FINANCE
Net interest income (b)	$	90			93			88			87			91
Fee and other income		192			184			185			176			184
Intersegment revenue		(30	)		(30	)		(29	)		(28	)		(30	)
Total revenue (b)		252			247			244			235			245
Provision for credit losses		—			12			—			—			—
Noninterest expense		172			167			165			167			160
Income taxes		29			26			29			24			32
Tax-equivalent adjustment		—			—			—			—			—
Segment earnings	$	51			42			50			44			53
Economic profit	$	39			36			40			34			44
Risk adjusted return on capital		54.08	%		48.06			60.34			52.94			74.45
Economic capital, average	$	367			392			321			319			284
Cash overhead efficiency ratio (b)		68.04	%		67.90			67.38			70.85			65.55
Average loans, net	$	7,120			6,320			5,610			5,251			5,213
Average core deposits	$	16,212			16,495			15,550			14,386			13,569
INVESTMENT BANKING
Net interest income (b)	$	218			284			228			216			264
Fee and other income		889			608			731			511			551
Intersegment revenue		(14	)		(28	)		(21	)		(17	)		(10	)
Total revenue (b)		1,093			864			938			710			805
Provision for credit losses		—			—			—			1			—
Noninterest expense		610			527			534			440			466
Income taxes		154			100			127			72			96
Tax-equivalent adjustment		22			23			21			27			28
Segment earnings	$	307			214			256			170			215
Economic profit	$	239			151			192			108			158
Risk adjusted return on capital		52.71	%		39.03			46.54			31.75			42.69
Economic capital, average	$	2,325			2,141			2,144			2,096			2,010
Cash overhead efficiency ratio (b)		55.83	%		60.84			56.96			62.05			57.88
Average loans, net	$	5,045			4,843			3,771			3,702			3,300
Average core deposits	$	8,958			9,154			8,829			7,634			6,787

(Continued)

32

Table 5
BUSINESS SEGMENTS

	2006			2005
	First			Fourth			Third			Second			First
(Dollars in millions)	Quarter			Quarter			Quarter			Quarter			Quarter
PARENT
Net interest income (a)	$	114			157			188			215			263
Fee and other income		(15	)		(15	)		129			177			44
Intersegment revenue		2			1			(1	)		2			—
Total revenue (a)		101			143			316			394			307
Provision for credit losses		(2	)		18			2			(10	)		(17	)
Noninterest expense		227			312			227			204			292
Minority interest		95			103			105			85			74
Income tax benefits		(140	)		(231	)		(108	)		(58	)		(83	)
Tax-equivalent adjustment		17			19			21			17			24
Segment earnings (loss)	$	(96	)		(78	)		69			156			17
Economic profit	$	(117	)		(99	)		44			131			(3	)
Risk adjusted return on capital		(6.68	)%		(2.27	)		17.02			29.75			10.41
Economic capital, average	$	2,677			2,965			2,907			2,809			2,784
Cash overhead efficiency ratio (a)		134.94	%		153.68			40.23			24.46			57.65
Lending commitments	$	516			508			433			430			398
Average loans, net		23,325			11,740			11,726			10,198			11,868
Average core deposits	$	5,287			5,765			5,563			4,672			4,577
FTE employees		24,144			23,966			24,491			24,904			25,023

(a) Tax-equivalent.

(Continued)

33

Table 5
BUSINESS SEGMENTS

	Three Months Ended March 31, 2006
															Net Merger-
									Corporate						Related
									and						and
	General			Capital			Wealth		Investment						Restructuring
(Dollars in millions)	Bank			Management			Management		Bank			Parent			Expenses (b)			Total
CONSOLIDATED
Net interest income (a)	$	2,572			198			149		506			114			(49	)		3,490
Fee and other income		872			1,227			191		1,242			(15	)		—			3,517
Intersegment revenue		45			(11	)		1		(37	)		2			—			—
Total revenue (a)		3,489			1,414			341		1,711			101			(49	)		7,007
Provision for credit losses		62			—			—		1			(2	)		—			61
Noninterest expense		1,677			1,129			250		888			227			68			4,239
Minority interest		—			—			—		—			95			—			95
Income taxes (benefits)		628			104			33		281			(140	)		(22	)		884
Tax-equivalent adjustment		10			—			—		22			17			(49	)		—
Net income (loss)	$	1,112			181			58		519			(96	)		(46	)		1,728
Economic profit	$	866			139			41		332			(117	)		—			1,261
Risk adjusted return on capital		58.28	%		47.20			42.87		33.66			(6.68	)		—			39.22
Economic capital, average	$	7,431			1,555			516		5,941			2,677			—			18,120
Cash overhead efficiency ratio (a)		48.06	%		79.84			73.21		51.90			134.94			—			57.81
Lending commitments	$	115,788			237			6,229		103,812			516			—			226,582
Average loans, net		178,358			462			15,526		42,903			23,325			—			260,574
Average core deposits	$	216,375			28,671			14,557		25,324			5,287			—			290,214
FTE employees		45,443			17,107			4,771		5,669			24,144			—			97,134

	Three Months Ended March 31, 2005
																Net Merger-
										Corporate						Related
										and						and
	General			Capital			Wealth			Investment						Restructuring
(Dollars in millions)	Bank			Management			Management			Bank			Parent			Expenses (b)			Total
CONSOLIDATED
Net interest income (a)	$	2,329			152			140			590			263			(61	)		3,413
Fee and other income		684			1,137			151			979			44			—			2,995
Intersegment revenue		43			(11	)		2			(34	)		—			—			—
Total revenue (a)		3,056			1,278			293			1,535			307			(61	)		6,408
Provision for credit losses		57			—			(1	)		(3	)		(17	)		—			36
Noninterest expense		1,543			1,047			196			733			292			61			3,872
Minority interest		—			—			—			—			74			(10	)		64
Income taxes (benefits)		525			85			37			271			(83	)		(20	)		815
Tax-equivalent adjustment		9			—			—			28			24			(61	)		—
Net income	$	922			146			61			506			17			(31	)		1,621
Economic profit	$	686			106			45			344			(3	)		—			1,178
Risk adjusted return on capital		50.57	%		40.48			52.55			38.45			10.41			—			39.43
Economic capital, average	$	7,033			1,460			442			5,082			2,784			—			16,801
Cash overhead efficiency ratio (a)		50.48	%		81.97			67.16			47.77			57.65			—			57.15
Lending commitments	$	97,069			148			4,862			80,608			398			—			183,085
Average loans, net		159,641			322			12,829			36,515			11,868			—			221,175
Average core deposits	$	201,699			30,632			13,303			20,884			4,577			—			271,095
FTE employees		42,137			17,851			4,035			4,623			25,023			—			93,669

(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.

34

Table 6
NET TRADING REVENUE — INVESTMENT BANKING (a)

	2006		2005
	First		Fourth			Third		Second		First
(In millions)	Quarter		Quarter			Quarter		Quarter		Quarter
Net interest income (Tax-equivalent)	$	59		126			107		92		130
Trading accounts profits (losses)		208		(51	)		135		44		92
Other fee income		105		88			67		74		70
Total net trading revenue (Tax-equivalent)	$	372		163			309		210		292

(a) Certain amounts presented in periods prior to the first quarter of 2006 have been reclassified to conform to the presentation in the first quarter of 2006.

Table 7
SELECTED RATIOS

	2006			2005
	First			Fourth		Third		Second		First
	Quarter			Quarter		Quarter		Quarter		Quarter
PERFORMANCE RATIOS (a)
Assets to stockholders’ equity		10.90	X		11.21		10.81		10.68		10.60
Return on assets		1.34	%		1.30		1.29		1.31		1.31
Return on common stockholders’ equity		14.62			14.60		13.95		14.04		13.92
Return on total stockholders’ equity		14.62	%		14.60		13.95		14.04		13.92
DIVIDEND PAYOUT RATIOS
Common shares		46.79	%		46.79		48.11		44.23		45.54

(a) Based on average balances and net income.

35

Table 8
TRADING ACCOUNT ASSETS AND LIABILITIES

	2006		2005
	First		Fourth		Third		Second		First
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
TRADING ACCOUNT ASSETS
U.S. Treasury	$	938		1,293		1,120		2,815		5,822
U.S. Government agencies		1,990		2,154		2,692		2,882		3,414
State, county and municipal		1,449		2,180		1,998		1,874		1,587
Mortgage-backed securities		2,580		2,582		4,470		5,112		4,269
Other asset-backed securities		5,923		7,486		9,360		8,523		7,303
Corporate bonds and debentures		5,578		4,932		5,598		5,604		6,284
Equity securities		4,864		5,665		5,657		5,297		4,696
Derivative financial instruments		10,990		10,010		11,144		11,110		10,886
Sundry		5,073		6,402		7,607		3,302		2,888
Total trading account assets	$	39,385		42,704		49,646		46,519		47,149
TRADING ACCOUNT LIABILITIES
Securities sold short		8,418		8,790		9,914		9,953		13,020
Derivative financial instruments		9,428		8,808		9,901		9,874		9,398
Total trading account liabilities	$	17,846		17,598		19,815		19,827		22,418

36

Table 9
LOANS — ON—BALANCE SHEET, AND MANAGED AND SERVICING PORTFOLIOS

	2006		2005
	First		Fourth		Third		Second		First
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
ON-BALANCE SHEET LOAN PORTFOLIO
COMMERCIAL
Commercial, financial and agricultural	$	89,138		87,327		83,241		80,528		78,669
Real estate — construction and other		14,483		13,972		13,653		13,216		12,713
Real estate — mortgage		20,066		19,966		19,864		19,724		20,707
Lease financing		25,238		25,368		25,022		24,836		25,013
Foreign		11,535		10,221		8,888		7,549		7,504
Total commercial		160,460		156,854		150,668		145,853		144,606
CONSUMER
Real estate secured		98,898		94,748		80,128		76,213		74,631
Student loans		10,555		9,922		11,458		10,828		10,795
Installment loans		20,189		6,751		6,745		6,783		6,808
Total consumer		129,642		111,421		98,331		93,824		92,234
Total loans		290,102		268,275		248,999		239,677		236,840
Unearned income		9,170		9,260		9,266		9,390		9,574
Loans, net (On-balance sheet)	$	280,932		259,015		239,733		230,287		227,266
MANAGED PORTFOLIO (a)
COMMERCIAL
On-balance sheet loan portfolio	$	160,460		156,854		150,668		145,853		144,606
Securitized loans — off-balance sheet		1,191		1,227		1,263		1,293		1,402
Loans held for sale		3,588		3,860		4,039		1,783		1,117
Total commercial		165,239		161,941		155,970		148,929		147,125
CONSUMER
Real estate secured
On-balance sheet loan portfolio		98,898		94,748		80,128		76,213		74,631
Securitized loans — off-balance sheet		7,598		8,438		9,255		10,199		6,979
Securitized loans included in securities		4,628		4,817		4,218		4,426		4,626
Loans held for sale		3,679		2,296		12,660		11,923		11,925
Total real estate secured		114,803		110,299		106,261		102,761		98,161
Student
On-balance sheet loan portfolio		10,555		9,922		11,458		10,828		10,795
Securitized loans — off-balance sheet		1,866		2,000		341		382		423
Securitized loans included in securities		52		52		—		—		—
Loans held for sale		—		—		—		16		65
Total student		12,473		11,974		11,799		11,226		11,283
Installment
On-balance sheet loan portfolio		20,189		6,751		6,745		6,783		6,808
Securitized loans — off-balance sheet		3,297		3,392		2,228		2,662		1,930
Securitized loans included in securities		193		206		146		163		155
Loans held for sale		592		249		1,339		809		1,066
Total installment		24,271		10,598		10,458		10,417		9,959
Total consumer		151,547		132,871		128,518		124,404		119,403
Total managed portfolio	$	316,786		294,812		284,488		273,333		266,528
SERVICING PORTFOLIO (b)
Commercial	$	192,367		173,428		158,650		152,923		140,493
Consumer	$	58,697		56,741		55,813		51,954		45,063

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.

37

Table 10
LOANS HELD FOR SALE

	2006			2005
	First			Fourth			Third			Second			First
(In millions)	Quarter			Quarter			Quarter			Quarter			Quarter
Core business activity, beginning of period (a)	$	6,388			18,014			14,447			13,715			12,293
Balance of acquired entities at purchase date		—			873			—			—			—
Originations/purchases		13,068			13,704			15,157			10,577			7,692
Transfer to (from) loans held for sale, net		(70	)		(12,060	)		(562	)		(583	)		462
Lower of cost or market value adjustments		—			—			—			(1	)		1
Performing loans sold or securitized		(11,397	)		(11,444	)		(8,604	)		(6,999	)		(5,109	)
Other, principally payments		(143	)		(2,699	)		(2,424	)		(2,262	)		(1,624	)
Core business activity, end of period		7,846			6,388			18,014			14,447			13,715
Portfolio management activity, end of period (a)		13			17			24			84			458
Total loans held for sale (b)	$	7,859			6,405			18,038			14,531			14,173

(a)	Core business activity means we originate loans with the intent to sell them to third parties, and portfolio management activity means we look for market opportunities to reduce risk in the loan portfolio by transferring loans to loans held for sale.
(b)	Nonperforming assets included in loans held for sale at March 31, 2006, and at December 31, September 30, June 30, and March 31, 2005, were $24 million, $32 million, $59 million, $111 million and $159 million, respectively.

38

Table 11
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS

	2006			2005
	First			Fourth			Third			Second			First
(In millions)	Quarter			Quarter			Quarter			Quarter			Quarter
ALLOWANCE FOR LOAN LOSSES (a)
Balance, beginning of period	$	2,724			2,719			2,718			2,732			2,757
Provision for credit losses		59			72			74			48			33
Provision for credit losses relating to loans transferred to loans held for sale or sold		—			5			12			—			1
Balance of acquired entities at purchase date		300			—			—			—			—
Allowance relating to loans acquired, transferred to loans held for sale or sold		12			(21	)		(26	)		(11	)		(13	)
Net charge-offs		(59	)		(51	)		(59	)		(51	)		(46	)
Balance, end of period	$	3,036			2,724			2,719			2,718			2,732
as a % of loans, net		1.08	%		1.05			1.13			1.18			1.20
as a % of nonaccrual and restructured loans (b)		452	%		439			347			332			300
as a % of nonperforming assets (b)		389	%		378			303			284			262
LOAN LOSSES
Commercial, financial and agricultural	$	27			52			43			35			26
Commercial real estate — construction and mortgage		7			12			9			—			1
Consumer		69			65			71			75			67
Total loan losses		103			129			123			110			94
LOAN RECOVERIES
Commercial, financial and agricultural		16			50			35			25			26
Commercial real estate — construction and mortgage		—			3			2			1			—
Consumer		28			25			27			33			22
Total loan recoveries		44			78			64			59			48
Net charge-offs	$	59			51			59			51			46
Commercial loan net charge-offs as % of average commercial loans, net (c)		0.05	%		0.03			0.05			0.03			—
Consumer loan net charge-offs as % of average consumer loans, net (c)		0.14			0.16			0.18			0.18			0.19
Total net charge-offs as % of average loans, net (c)		0.09	%		0.09			0.10			0.09			0.08
NONPERFORMING ASSETS
Nonaccrual loans
Commercial, financial and agricultural	$	342			307			445			497			527
Commercial real estate — construction and mortgage		84			85			120			88			131
Consumer real estate secured		240			221			209			221			239
Installment loans		6			7			10			13			13
Total nonaccrual loans		672			620			784			819			910
Foreclosed properties (d)		108			100			112			138			132
Total nonperforming assets	$	780			720			896			957			1,042
Nonperforming loans included in loans held for sale (e)	$	24			32			59			111			159
Nonperforming assets included in loans and in loans held for sale	$	804			752			955			1,068			1,201
as % of loans, net, and foreclosed properties (b)		0.28	%		0.28			0.37			0.42			0.46
as % of loans, net, foreclosed properties and loans held for sale (e)		0.28	%		0.28			0.37			0.44			0.50
Accruing loans past due 90 days	$	610			625			525			521			510

(a)	See Table 12 for information related to the reserve for unfunded lending commitments.
(b)	These ratios do not include nonperforming loans included in loans held for sale.
(c)	Annualized.
(d)	Restructured loans are not significant.
(e)	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.

39

Table 12
RESERVE FOR UNFUNDED LENDING COMMITMENTS

	2006		2005
	First		Fourth		Third			Second		First
(In millions)	Quarter		Quarter		Quarter			Quarter		Quarter
RESERVE FOR UNFUNDED LENDING COMMITMENTS
Balance, beginning of period	$	158		154		158			156		154
Provision for credit losses		2		4		(4	)		2		2
Balance, end of period	$	160		158		154			158		156

40

Table 13
NONACCRUAL LOAN ACTIVITY (a)

	2006			2005
	First			Fourth			Third			Second			First
(In millions)	Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period	$	620			784			819			910			955
Commercial nonaccrual loan activity
Commercial nonaccrual loans, beginning of period		392			565			585			658			712
New nonaccrual loans and advances		147			117			229			195			210
Gross charge-offs		(34	)		(64	)		(52	)		(35	)		(27	)
Transfers to loans held for sale		—			—			—			—			(25	)
Transfers to other real estate owned		—			(1	)		(1	)		(25	)		—
Sales		(2	)		(91	)		(93	)		(83	)		(46	)
Other, principally payments		(77	)		(134	)		(103	)		(125	)		(166	)
Net commercial nonaccrual loan activity		34			(173	)		(20	)		(73	)		(54	)
Commercial nonaccrual loans, end of period		426			392			565			585			658
Consumer nonaccrual loan activity
Consumer nonaccrual loans, beginning of period		228			219			234			252			243
New nonaccrual loans, advances and other, net		18			(5	)		(15	)		(18	)		9
Transfers from loans held for sale		—			15			—			—			—
Sales and securitizations		—			(1	)		—			—			—
Net consumer nonaccrual loan activity		18			9			(15	)		(18	)		9
Consumer nonaccrual loans, end of period		246			228			219			234			252
Balance, end of period	$	672			620			784			819			910

(a) Excludes nonaccrual loans included in loans held for sale and foreclosed properties.

41

Table 14
GOODWILL AND OTHER INTANGIBLE ASSETS

	2006		2005
	First		Fourth		Third		Second		First
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
Goodwill	$	23,443		21,807		21,857		21,861		21,635
Deposit base		691		705		779		861		951
Customer relationships		742		413		416		427		387
Tradename		90		90		90		90		90
Total goodwill and other intangible assets	$	24,966		23,015		23,142		23,239		23,063

	Three Months Ended March 31, 2006
	Employee			Occupancy
	Termination			and
(In millions)	Benefits			Equipment			Other			Total
EXIT COST PURCHASE ACCOUNTING ACCRUAL ACTIVITY
Wachovia/SouthTrust — November 1, 2004
Balance, December 31, 2005	$	123			9			3			135
Purchase accounting adjustments		—			—			—			—
Cash payments		(20	)		—			(1	)		(21	)
Noncash write-downs		—			(8	)		—			(8	)
Balance, March 31, 2006	$	103			1			2			106

42

Table 15
DEPOSITS

	2006		2005
	First		Fourth		Third		Second		First
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
CORE DEPOSITS
Noninterest-bearing	$	67,365		67,487		68,402		63,079		61,626
Savings and NOW accounts		80,773		81,536		78,013		79,957		81,485
Money market accounts		100,078		100,220		98,838		92,869		93,840
Other consumer time		47,876		44,319		42,479		39,376		36,932
Total core deposits		296,092		293,562		287,732		275,281		273,883
OTHER DEPOSITS
Foreign		19,157		18,041		15,736		15,029		13,293
Other time		13,315		13,291		16,971		9,600		10,481
Total deposits	$	328,564		324,894		320,439		299,910		297,657

Table 16
TIME DEPOSITS IN AMOUNTS OF $100,000 OR MORE

	March 31, 2006
(In millions)
MATURITY OF
3 months or less	$	6,246
Over 3 months through 6 months		1,943
Over 6 months through 12 months		7,107
Over 12 months		7,318
Total time deposits in amounts of $100,000 or more	$	22,614

43

Table 17
LONG-TERM DEBT

	2006			2005
	First			Fourth			Third		Second		First
(In millions)	Quarter			Quarter			Quarter		Quarter		Quarter
NOTES AND DEBENTURES ISSUED BY THE PARENT COMPANY
Notes
3.50% to 6.625%, due 2006 to 2020	$	6,352			5,724			5,724		7,575		6,825
Floating rate, due 2006 to 2012		9,249			8,449			7,149		7,149		6,749
Equity-linked, due 2006 to 2012		444			343			168		128		107
Floating rate extendible		—			—			—		—		10
Subordinated notes
5.80%, income trust securities, due 2042		2,501			—			—		—		—
4.875% to 7.50%, due 2006 to 2035		5,489			5,784			5,787		5,738		5,994
6.30%, Putable/Callable, due 2028		200			200			200		200		200
6.605%, due 2025		250			250			250		250		250
Floating rate, due 2015		600			600			—		—		—
Subordinated debentures
6.55% to 7.574%, due 2026 to 2035		795			796			795		795		795
Hedge-related basis adjustments		(103	)		111			97		405		172
Total notes and debentures issued by the Parent Company		25,777			22,257			20,170		22,240		21,102
NOTES ISSUED BY SUBSIDIARIES
Notes, primarily notes issued under global bank note programs, varying rates and terms to 2040		10,589			6,235			4,386		4,922		5,238
Subordinated notes
Bank, 4.60% to 9.60%, due 2006 to 2036		8,336			6,549			6,549		6,849		6,849
Floating rate, due 2013		417			417			417		417		417
7.80% to 7.95%, due 2006 to 2007		250			250			250		250		250
6.75%, due 2006		200			200			200		200		200
Total notes issued by subsidiaries		19,792			13,651			11,802		12,638		12,954
OTHER DEBT
Junior subordinated debentures, floating rate, due 2026 to 2029		3,114			3,114			3,106		3,106		3,106
Auto secured financing, due 2006 to 2013		10,168			—			—		—		—
Collateralized notes, floating rate, due 2006 to 2007		4,420			4,420			4,420		4,420		4,420
Advances from the Federal Home Loan Bank		2,519			2,519			4,145		4,970		5,001
Preferred units issued by subsidiaries		2,352			2,352			852		322		102
Capitalized leases		38			39			737		740		743
Mortgage notes and other debt of subsidiaries		2,072			706			525		324		483
Hedge-related basis adjustments		(34	)		(87	)		89		246		21
Total other debt		24,649			13,063			13,874		14,128		13,876
Total long-term debt	$	70,218			48,971			45,846		49,006		47,932

44

Table 18
CHANGES IN STOCKHOLDERS’ EQUITY

	2006			2005
	First			Fourth			Third			Second			First
(In millions)	Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period, as reported	$	47,561			46,757			47,904			46,467			47,317
Cumulative effect of an accounting change, net of income taxes		41			—			—			—			—
Balance, beginning of period		47,602			46,757			47,904			46,467			47,317
Comprehensive income
Net income		1,728			1,707			1,665			1,650			1,621
Minimum pension liability		—			(19	)		—			—			—
Net unrealized gain (loss) on debt and equity securities		(792	)		(397	)		(848	)		607			(786	)
Net unrealized gain (loss) on derivative financial instruments		(23	)		(29	)		(9	)		5			(22	)
Total comprehensive income		913			1,262			808			2,262			813
Purchases of common stock		(2,108	)		(42	)		(1,305	)		(247	)		(1,099	)
Common stock issued for
Stock options and restricted stock		455			299			73			234			292
Acquisitions		3,868			—			3			—			—
Deferred compensation, net		(119	)		79			67			(87	)		(129	)
Cash dividends on common shares		(822	)		(794	)		(793	)		(725	)		(727	)
Balance, end of period	$	49,789			47,561			46,757			47,904			46,467

45

Table 19
CAPITAL RATIOS

	2006			2005
	First			Fourth		Third		Second		First
(In millions)	Quarter			Quarter		Quarter		Quarter		Quarter
CONSOLIDATED CAPITAL RATIOS (a)
Qualifying capital
Tier 1 capital	$	34,013			30,308		28,993		29,176		28,519
Total capital		49,510			43,709		42,183		41,791		41,093
Adjusted risk-weighted assets		432,215			404,068		390,843		371,511		360,516
Adjusted leverage ratio assets	$	495,531			495,601		486,865		478,524		475,845
Ratios
Tier 1 capital		7.87	%		7.50		7.42		7.85		7.91
Total capital		11.45			10.82		10.79		11.25		11.40
Leverage		6.86			6.12		5.96		6.10		5.99
STOCKHOLDERS’ EQUITY TO ASSETS
Quarter-end		9.19			9.13		8.78		9.36		9.17
Average		9.18	%		8.92		9.25		9.36		9.44
BANK CAPITAL RATIOS
Tier 1 capital
Wachovia Bank, National Association		7.71	%		7.45		7.55		7.95		8.02
Wachovia Bank of Delaware, National Association		15.02			14.07		13.59		14.09		15.13
Total capital
Wachovia Bank, National Association		11.25			10.70		11.07		11.79		11.96
Wachovia Bank of Delaware, National Association		17.16			16.27		15.67		16.43		17.58
Leverage
Wachovia Bank, National Association		6.89			6.26		6.27		6.40		6.33
Wachovia Bank of Delaware, National Association		11.60	%		10.52		11.48		11.83		13.25

(a) Risk-based capital ratio guidelines require a minimum ratio of tier 1 capital to risk-weighted assets of 4.00 percent and a minimum ratio of total capital to risk-weighted assets of 8.00 percent. The minimum leverage ratio of tier 1 capital to adjusted average quarterly assets is from 3.00 percent to 4.00 percent.

46

WACHOVIA CORPORATION AND SUBSIDIARIES

NET INTEREST INCOME SUMMARIES

	FIRST QUARTER 2006							FOURTH QUARTER 2005
					Average							Average
			Interest		Rates					Interest		Rates
	Average		Income/		Earned/			Average		Income/		Earned/
(In millions)	Balances		Expense		Paid			Balances		Expense		Paid
ASSETS
Interest-bearing bank balances	$	2,872		31		4.31	%	$	2,514		24		3.75	%
Federal funds sold and securities purchased under resale agreements		19,657		209		4.31			22,647		237		4.17
Trading account assets (a)		27,240		344		5.08			34,461		482		5.59
Securities (a)		117,944		1,557		5.28			115,557		1,506		5.21
Loans (a) (b)
Commercial
Commercial, financial and agricultural		87,784		1,411		6.51			85,155		1,326		6.17
Real estate — construction and other		14,184		243		6.95			13,803		226		6.51
Real estate — mortgage		20,166		350		7.04			20,132		333		6.57
Lease financing		10,050		171		6.81			10,153		184		7.26
Foreign		10,285		118		4.67			9,118		97		4.23
Total commercial		142,469		2,293		6.52			138,361		2,166		6.22
Consumer
Real estate secured		96,082		1,514		6.31			80,984		1,236		6.10
Student loans		10,589		157		6.00			11,235		155		5.46
Installment loans		11,434		242		8.57			6,902		127		7.32
Total consumer		118,105		1,913		6.50			99,121		1,518		6.11
Total loans		260,574		4,206		6.51			237,482		3,684		6.17
Loans held for sale		8,274		128		6.24			17,646		270		6.10
Other earning assets		5,966		118		8.04			8,897		155		6.92
Total earning assets excluding derivatives		442,527		6,593		6.00			439,204		6,358		5.77
Risk management derivatives (c)		—		163		0.15			—		184		0.16
Total earning assets including derivatives		442,527		6,756		6.15			439,204		6,542		5.93
Cash and due from banks		12,762							12,770
Other assets		66,920							68,408
Total assets	$	522,209						$	520,382
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits
Savings and NOW accounts		79,783		304		1.54			78,936		258		1.30
Money market accounts		99,632		670		2.73			100,999		609		2.39
Other consumer time		46,309		407		3.57			43,549		369		3.37
Foreign		19,330		187		3.92			17,464		157		3.56
Other time		13,286		153		4.67			14,859		166		4.46
Total interest-bearing deposits		258,340		1,721		2.70			255,807		1,559		2.42
Federal funds purchased and securities sold under repurchase agreements		50,087		503		4.07			55,336		526		3.77
Commercial paper		4,193		41		3.93			8,062		76		3.74
Securities sold short		8,520		63		3.01			8,801		70		3.13
Other short-term borrowings		7,214		40		2.26			7,164		39		2.18
Long-term debt		56,052		697		4.99			47,804		576		4.81
Total interest-bearing liabilities excluding derivatives		384,406		3,065		3.23			382,974		2,846		2.95
Risk management derivatives (c)		—		152		0.16			—		121		0.13
Total interest-bearing liabilities including derivatives		384,406		3,217		3.39			382,974		2,967		3.08
Noninterest-bearing deposits		64,490							64,018
Other liabilities		25,387							26,983
Stockholders’ equity		47,926							46,407
Total liabilities and stockholders’ equity	$	522,209						$	520,382
Interest income and rate earned — including derivatives			$	6,756		6.15	%			$	6,542		5.93	%
Interest expense and equivalent rate paid — including derivatives				3,217		2.94					2,967		2.68
Net interest income and margin — including derivatives			$	3,539		3.21	%			$	3,575		3.25	%

(a)	Yields related to securities and loans exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 35 percent and applicable state tax rates. Lease financing amounts include related deferred income taxes.
(b)	The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.

47

THIRD QUARTER 2005						SECOND QUARTER 2005							FIRST QUARTER 2005
			Average							Average							Average
	Interest		Rates					Interest		Rates					Interest		Rates
Average	Income/		Earned/			Average		Income/		Earned/			Average		Income/		Earned/
Balances	Expense		Paid			Balances		Expense		Paid			Balances		Expense		Paid
$    2,417		21		3.46	%	$	2,649		20		3.07	%	$	2,484		16		2.62	%
24,451		216		3.50			24,676		189		3.08			24,272		153		2.55
33,720		407		4.82			31,879		377		4.73			35,147		402		4.59
114,902		1,461		5.08			115,006		1,469		5.11			114,961		1,477		5.15
81,488		1,184		5.77			80,213		1,084		5.42			76,651		960		5.08
13,322		201		5.96			12,885		177		5.53			12,608		156		5.01
19,684		302		6.09			20,204		288		5.71			20,739		271		5.31
9,979		178		7.15			10,252		183		7.11			10,513		182		6.94
8,164		80		3.88			7,641		68		3.55			7,192		58		3.28
132,637		1,945		5.82			131,195		1,800		5.50			127,703		1,627		5.16
78,088		1,166		5.97			74,799		1,072		5.74			74,658		1,037		5.57
11,267		144		5.07			10,995		129		4.72			11,003		120		4.41
6,968		124		7.04			6,892		115		6.75			7,811		122		6.31
96,323		1,434		5.94			92,686		1,316		5.69			93,472		1,279		5.49
228,960		3,379		5.87			223,881		3,116		5.58			221,175		2,906		5.30
16,567		244		5.90			14,024		194		5.51			12,869		166		5.19
10,329		138		5.27			10,419		125		4.84			10,139		115		4.58
431,346		5,866		5.42			422,534		5,490		5.20			421,047		5,235		5.00
—		231		0.21			—		265		0.26			—		279		0.27
431,346		6,097		5.63			422,534		5,755		5.46			421,047		5,514		5.27
12,277							12,389							12,661
67,944							68,438							66,778
$511,567						$	503,361						$	500,486
78,961		220		1.10			80,113		194		0.97			81,071		161		0.81
97,746		529		2.15			94,990		455		1.92			93,477		357		1.55
41,063		325		3.13			38,064		273		2.87			36,005		239		2.70
15,285		123		3.18			11,857		81		2.75			10,996		61		2.26
10,338		109		4.21			9,999		78		3.09			12,583		83		2.67
243,393		1,306		2.13			235,023		1,081		1.84			234,132		901		1.56
56,426		460		3.24			53,984		375		2.79			51,395		312		2.46
12,664		108		3.39			13,365		97		2.91			13,553		82		2.45
9,040		77		3.38			10,648		92		3.49			12,681		102		3.25
6,471		29		1.80			6,694		30		1.82			6,370		26		1.63
47,788		536		4.48			48,114		528		4.39			47,385		493		4.17
375,782		2,516		2.66			367,828		2,203		2.40			365,516		1,916		2.12
—		141		0.15			—		141		0.16			—		124		0.14
375,782		2,657		2.81			367,828		2,344		2.56			365,516		2,040		2.26
62,978							62,171							60,542
25,479							26,248							27,197
47,328							47,114							47,231
$511,567						$	503,361						$	500,486
	$	6,097		5.63	%			$	5,755		5.46	%			$	5,514		5.27	%
		2,657		2.45					2,344		2.23					2,040		1.96
	$	3,440		3.18	%			$	3,411		3.23	%			$	3,474		3.31	%

(c) 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.

48

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	2006			2005
	First			Fourth			Third			Second			First
(In millions, except per share data)	Quarter			Quarter			Quarter			Quarter			Quarter
ASSETS
Cash and due from banks	$	12,668			15,072			12,976			12,464			12,043
Interest-bearing bank balances		1,563			2,638			2,492			2,852			1,285
Federal funds sold and securities purchased under resale agreements (carrying amount of collateral held $8,721 at March 31, 2006, $546 repledged)		18,807			19,915			27,083			22,528			24,899
Total cash and cash equivalents		33,038			37,625			42,551			37,844			38,227
Trading account assets		39,385			42,704			49,646			46,519			47,149
Securities		118,818			114,889			117,195			117,906			116,731
Loans, net of unearned income		280,932			259,015			239,733			230,287			227,266
Allowance for loan losses		(3,036	)		(2,724	)		(2,719	)		(2,718	)		(2,732	)
Loans, net		277,896			256,291			237,014			227,569			224,534
Loans held for sale		7,859			6,405			18,038			14,531			14,173
Premises and equipment		5,194			4,910			5,352			5,354			5,260
Due from customers on acceptances		968			824			882			826			826
Goodwill		23,443			21,807			21,857			21,861			21,635
Other intangible assets		1,523			1,208			1,285			1,378			1,428
Other assets		33,718			34,092			38,561			38,052			36,870
Total assets	$	541,842			520,755			532,381			511,840			506,833
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Noninterest-bearing deposits		67,365			67,487			68,402			63,079			61,626
Interest-bearing deposits		261,199			257,407			252,037			236,831			236,031
Total deposits		328,564			324,894			320,439			299,910			297,657
Short-term borrowings		55,390			61,953			78,184			75,726			73,401
Bank acceptances outstanding		985			892			932			859			866
Trading account liabilities		17,846			17,598			19,815			19,827			22,418
Other liabilities		16,070			15,986			16,504			15,750			15,281
Long-term debt		70,218			48,971			45,846			49,006			47,932
Total liabilities		489,073			470,294			481,720			461,078			457,555
Minority interest in net assets of consolidated subsidiaries		2,980			2,900			3,904			2,858			2,811
STOCKHOLDERS’ EQUITY
Dividend Equalization Preferred shares, no par value, 97 million shares issued and outstanding at March 31, 2006		—			—			—			—			—
Non-Cumulative Perpetual Class A Preferred Stock, Series I, $100,000 liquidation preference per share, 25,010 shares authorized		—			—			—			—			—
Common stock, $3.33-1/3 par value; authorized 3 billion shares, outstanding 1.608 billion shares at March 31, 2006		5,362			5,189			5,178			5,258			5,255
Paid-in capital		34,291			31,172			30,821			31,038			30,976
Retained earnings		11,724			11,973			11,086			11,079			10,319
Accumulated other comprehensive income, net		(1,588	)		(773	)		(328	)		529			(83	)
Total stockholders’ equity		49,789			47,561			46,757			47,904			46,467
Total liabilities and stockholders’ equity	$	541,842			520,755			532,381			511,840			506,833

49

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	2006			2005
	First			Fourth			Third		Second		First
(In millions, except per share data)	Quarter			Quarter			Quarter		Quarter		Quarter
INTEREST INCOME
Interest and fees on loans	$	4,321			3,846			3,588		3,362		3,174
Interest and dividends on securities		1,565			1,486			1,434		1,437		1,426
Trading account interest		325			462			387		354		378
Other interest income		496			696			635		549		475
Total interest income		6,707			6,490			6,044		5,702		5,453
INTEREST EXPENSE
Interest on deposits		1,779			1,618			1,408		1,221		1,050
Interest on short-term borrowings		718			764			742		670		601
Interest on long-term debt		720			585			507		453		389
Total interest expense		3,217			2,967			2,657		2,344		2,040
Net interest income		3,490			3,523			3,387		3,358		3,413
Provision for credit losses		61			81			82		50		36
Net interest income after provision for credit losses		3,429			3,442			3,305		3,308		3,377
FEE AND OTHER INCOME
Service charges		574			555			555		528		513
Other banking fees		428			400			385		355		351
Commissions		639			594			615		603		599
Fiduciary and asset management fees		745			769			732		728		714
Advisory, underwriting and other investment banking fees		302			325			294		257		233
Trading account profits (losses) (a)		219			(31	)		160		49		108
Principal investing		103			135			166		41		59
Securities gains (losses)		(48	)		(74	)		29		136		(2	)
Other income (a)		555			316			322		280		420
Total fee and other income		3,517			2,989			3,258		2,977		2,995
NONINTEREST EXPENSE
Salaries and employee benefits		2,697			2,470			2,476		2,324		2,401
Occupancy		275			283			260		271		250
Equipment		280			277			276		269		265
Advertising		47			51			50		48		44
Communications and supplies		167			155			158		158		162
Professional and consulting fees		167			213			167		155		127
Other intangible amortization		92			93			101		107		115
Merger-related and restructuring expenses		68			58			83		90		61
Sundry expense		446			583			433		366		447
Total noninterest expense		4,239			4,183			4,004		3,788		3,872
Minority interest in income of consolidated subsidiaries		95			103			104		71		64
Income from continuing operations before income taxes		2,612			2,145			2,455		2,426		2,436
Income taxes		884			652			790		776		815
Income from continuing operations		1,728			1,493			1,665		1,650		1,621
Discontinued operations, net of income taxes		—			214			—		—		—
Net income	$	1,728			1,707			1,665		1,650		1,621
PER COMMON SHARE DATA
Basic earnings
Income from continuing operations	$	1.11			0.97			1.07		1.05		1.03
Net income		1.11			1.11			1.07		1.05		1.03
Diluted earnings
Income from continuing operations		1.09			0.95			1.06		1.04		1.01
Net income		1.09			1.09			1.06		1.04		1.01
Cash dividends	$	0.51			0.51			0.51		0.46		0.46
AVERAGE COMMON SHARES
Basic		1,555			1,541			1,549		1,564		1,571
Diluted		1,586			1,570			1,575		1,591		1,603

a) Amounts presented prior to the first quarter of 2006 have been reclassified to conform to the presentation in the first quarter of 2006.

50

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets - March 31, 2006 and December 31, 2005 (Unaudited)	52
Consolidated Statements of Income - Three Months Ended March 31, 2006 and 2005 (Unaudited)	53
Consolidated Statements of Cash Flows - Three Months Ended March 31, 2006 and 2005 (Unaudited)	54
Notes to Consolidated Financial Statements (Unaudited)
Note 1: Summary of Significant Accounting Policies and Other Matters	55
Note 2: Securities	56
Note 3: Servicing Assets	58
Note 4: Share-Based Payments	59
Note 5: Comprehensive Income	60
Note 6: Business Segments	61
Note 7: Basic and Diluted Earnings Per Common Share	63
Note 8: Derivatives	63
Note 9: Guarantees	66

51

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

	March 31,			December 31,
(In millions, except per share data)	2006			2005
ASSETS
Cash and due from banks	$	12,668			15,072
Interest-bearing bank balances		1,563			2,638
Federal funds sold and securities purchased under resale agreements (carrying amount of collateral held $8,721 at March 31, 2006, $546 repledged)		18,807			19,915
Total cash and cash equivalents		33,038			37,625
Trading account assets		39,385			42,704
Securities		118,818			114,889
Loans, net of unearned income		280,932			259,015
Allowance for loan losses		(3,036	)		(2,724	)
Loans, net		277,896			256,291
Loans held for sale		7,859			6,405
Premises and equipment		5,194			4,910
Due from customers on acceptances		968			824
Goodwill		23,443			21,807
Other intangible assets		1,523			1,208
Other assets		33,718			34,092
Total assets	$	541,842			520,755
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Noninterest-bearing deposits		67,365			67,487
Interest-bearing deposits		261,199			257,407
Total deposits		328,564			324,894
Short-term borrowings		55,390			61,953
Bank acceptances outstanding		985			892
Trading account liabilities		17,846			17,598
Other liabilities		16,070			15,986
Long-term debt		70,218			48,971
Total liabilities		489,073			470,294
Minority interest in net assets of consolidated subsidiaries		2,980			2,900
STOCKHOLDERS’ EQUITY
Dividend Equalization Preferred shares, no par value, 97 million shares issued and outstanding at March 31, 2006		—			—
Non-Cumulative Perpetual Class A Preferred Stock, Series I, $100,000 liquidation preference per share, 25,010 shares authorized		—			—
Common stock, $3.33-1/3 par value; authorized 3 billion shares, outstanding 1.608 billion shares at March 31, 2006		5,362			5,189
Paid-in capital		34,291			31,172
Retained earnings		11,724			11,973
Accumulated other comprehensive income, net		(1,588	)		(773	)
Total stockholders’ equity		49,789			47,561
Total liabilities and stockholders’ equity	$	541,842			520,755

52

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended
	March 31,
(In millions, except per share data)	2006			2005
INTEREST INCOME
Interest and fees on loans	$	4,321			3,174
Interest and dividends on securities		1,565			1,426
Trading account interest		325			378
Other interest income		496			475
Total interest income		6,707			5,453
INTEREST EXPENSE
Interest on deposits		1,779			1,050
Interest on short-term borrowings		718			601
Interest on long-term debt		720			389
Total interest expense		3,217			2,040
Net interest income		3,490			3,413
Provision for credit losses		61			36
Net interest income after provision for credit losses		3,429			3,377
FEE AND OTHER INCOME
Service charges		574			513
Other banking fees		428			351
Commissions		639			599
Fiduciary and asset management fees		745			714
Advisory, underwriting and other investment banking fees		302			233
Trading account profits		219			108
Principal investing		103			59
Securities losses		(48	)		(2	)
Other income		555			420
Total fee and other income		3,517			2,995
NONINTEREST EXPENSE
Salaries and employee benefits		2,697			2,401
Occupancy		275			250
Equipment		280			265
Advertising		47			44
Communications and supplies		167			162
Professional and consulting fees		167			127
Other intangible amortization		92			115
Merger-related and restructuring expenses		68			61
Sundry expense		446			447
Total noninterest expense		4,239			3,872
Minority interest in income of consolidated subsidiaries		95			64
Income before income taxes		2,612			2,436
Income taxes		884			815
Net income	$	1,728			1,621
PER COMMON SHARE DATA
Basic earnings	$	1.11			1.03
Diluted earnings		1.09			1.01
Cash dividends	$	0.51			0.46
AVERAGE COMMON SHARES
Basic		1,555			1,571
Diluted		1,586			1,603

53

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Three Months Ended
	March 31,
(In millions)	2006			2005
OPERATING ACTIVITIES
Net income	$	1,728			1,621
Adjustments to reconcile net income to net cash provided (used) by operating activities
Accretion and amortization of securities discounts and premiums, net		5			54
Provision for credit losses		61			36
Gain on securitization transactions		(47	)		(18	)
Gain on sale of mortgage servicing rights		(6	)		(6	)
Securities losses		48			2
Depreciation and other amortization		423			367
Trading account assets, net		3,319			(1,217	)
Loss on sales of premises and equipment		10			52
Loans held for sale, net		(1,522	)		(602	)
Other assets, net		872			360
Trading account liabilities, net		248			709
Other liabilities, net		462			(427	)
Net cash provided by operating activities		5,601			931
INVESTING ACTIVITIES
Increase (decrease) in cash realized from
Sales of securities		9,871			12,397
Maturities of securities		4,841			9,960
Purchases of securities		(17,238	)		(29,800	)
Origination of loans, net		(8,334	)		(4,052	)
Sales of premises and equipment		57			21
Purchases of premises and equipment		(457	)		(237	)
Goodwill and other intangible assets		(36	)		(71	)
Purchase of bank-owned separate account life insurance		(267	)		(1,538	)
Cash equivalent acquired, net of purchases of banking operations		982			—
Net cash used by investing activities		(10,581	)		(13,320	)
FINANCING ACTIVITIES
Increase (decrease) in cash realized from
Increase in deposits, net		1,429			2,604
Securities sold under repurchase agreements and other short-term borrowings, net		(6,563	)		9,995
Issuances of long-term debt		10,812			2,841
Payments of long-term debt		(2,538	)		(1,668	)
Issuances of common stock, net		183			79
Purchases of common stock		(2,108	)		(1,099	)
Cash dividends paid		(822	)		(727	)
Net cash provided by financing activities		393			12,025
Decrease in cash and cash equivalents		(4,587	)		(364	)
Cash and cash equivalents, beginning of year		37,625			38,591
Cash and cash equivalents, end of period	$	33,038			38,227
NONCASH ITEMS
Transfer to securities from loans held for sale	$	13			—
Transfer to loans from loans held for sale		70			—
Transfer to loans held for sale from loans		—			583
Cumulative effect of an accounting change, net of income taxes		41			—
Issuance of common stock for purchase accounting merger	$	3,868			—

54

WACHOVIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS

GENERAL

     Wachovia Corporation and subsidiaries (together the “Company”) is a diversified financial services company whose operations are principally domestic.

     The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, the unaudited condensed consolidated financial statements do not include all the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The unaudited condensed consolidated financial statements of the Company include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of such financial statements for all periods presented. The financial position and result of operations as of and for the three months ended March 31, 2006, are not necessarily indicative of the results of operations that may be expected in the future. Please refer to the Company’s 2005 Annual Report on Form 10-K for additional information related to the Company’s audited consolidated financial statements for the three years ended December 31, 2005, including the related notes to consolidated financial statements.

     Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with U.S. generally accepted accounting principles. Actual results could differ from those estimates.

BUSINESS COMBINATIONS

     On September 12, 2005, the Company announced the signing of a definitive merger agreement with Westcorp and WFS Financial Inc (“WFS”) the common stock of which 84 percent was owned by Westcorp and 16 percent was held by the public. The acquisition of this California-based auto loan originator business was consummated on March 1, 2006. The terms of this transaction called for the Company to exchange 1.2749 shares of its common stock for each share of Westcorp common stock and 1.4661 shares of its common stock for each share of WFS common stock. Based on the Company’s average of the closing prices for a period two trading days before the announcement of the merger and two trading days after the merger announcement of $49.76 (which includes the day of announcement), the transaction is valued at $3.9 billion. The Company recorded preliminary fair value and exit cost purchase accounting adjustments of $282 million along with dealer relationship and deposit base intangibles of $405 million. Based on Westcorp tangible stockholders’ equity of $1.9 billion, this resulted in preliminary goodwill of $1.6 billion at March 31, 2006. The Westcorp March 1, 2006, allowance for loan losses recorded by the Company excluded Westcorp’s allowance for loan losses related to nonperforming loans.

PERSONNEL EXPENSE AND RETIREMENT BENEFITS

     The components of the retirement benefit costs included in salaries and employee benefits for the three months ended March 31, 2006 and 2005, are presented below.

											Other Postretirement
	Qualified Pension						Nonqualified Pension				Benefits
	Three Months Ended						Three Months Ended				Three Months Ended
	March 31,						March 31,				March 31,
(In millions)	2006			2005			2006		2005		2006			2005
RETIREMENT BENEFIT COSTS
Service cost	$	47			45			1		1		1			1
Interest cost		63			61			7		7		12			13
Expected return on plan assets		(107	)		(102	)		—		—		(1	)		(1	)
Amortization of prior service cost		(7	)		(7	)		—		—		(2	)		(2	)
Amortization of actuarial losses		35			22			3		2		1			2
Net retirement benefit costs	$	31			19			11		10		11			13

     With respect to the Qualified Pension, the Company estimates there will be no minimum required contribution in 2006 and that the maximum allowed contribution will be approximately $450 million. Additionally, the Company’s practice is to contribute annually to each of the Nonqualified Pension and Other Postretirement Benefits an amount equal to the benefit payments made during the year less any retiree contributions received during the year.

RECLASSIFICATIONS

     Certain amounts in 2005 were reclassified to conform with the presentation in 2006. These reclassifications had no effect on the Company’s previously reported consolidated financial position or results of operations. Changes in fair value of certain derivatives held for other-than-trading purposes, which are economic hedges not designated and accounted for as accounting hedges, are now presented in other income. Previously, for these certain derivatives, the changes in fair value were included in trading account profits. Prior period amounts have been reclassified to be consistent with the current period presentation.

55

NOTE 2: SECURITIES

	March 31, 2006
																		Average
	1 Year			1-5		5-10		After 10				Gross Unrealized				Amortized		Maturity
(In millions)	or Less			Years		Years		Years		Total		Gains		Losses		Cost		in Years
MARKET VALUE
U.S. Treasury	$	793			160		135		39		1,127		—		9		1,136		2.52
Mortgage-backed securities, principally obligations of U.S. Government agencies and sponsored entities		149			10,458		68,111		8		78,726		82		2,126		80,770		6.85
Asset-backed
Residual interests from securitizations		30			678		117		—		825		228		—		597		3.23
Retained bonds from securitizations		199			2,651		158		—		3,008		35		3		2,976		2.81
Collateralized mortgage obligations		49			7,008		1,458		—		8,515		45		146		8,616		3.89
Commercial mortgage-backed		70			2,976		3,943		7		6,996		151		146		6,991		5.43
Other		166			340		192		—		698		3		10		705		3.64
State, county and municipal		43			662		572		2,128		3,405		215		6		3,196		14.62
Sundry		762			2,289		6,803		5,664		15,518		95		193		15,616		9.43
Total market value	$	2,261			27,222		81,489		7,846		118,818		854		2,639		120,603		6.87
MARKET VALUE
Debt securities	$	2,261			27,222		81,489		5,314		116,286		814		2,626		118,098
Equity securities		—			—		—		2,532		2,532		40		13		2,505
Total market value	$	2,261			27,222		81,489		7,846		118,818		854		2,639		120,603
AMORTIZED COST
Debt securities	$	2,245			27,044		83,608		5,201		118,098
Equity securities		—			—		—		2,505		2,505
Total amortized cost	$	2,245			27,044		83,608		7,706		120,603
WEIGHTED AVERAGE YIELD
U.S. Treasury		4.52	%		2.01		2.59		4.95		3.94
Mortgage-backed securities, principally obligations of U.S. Government agencies and sponsored entities		6.26			5.34		5.03		5.01		5.08
Asset-backed
Residual interests from securitizations		24.76			13.60		25.10		—		15.59
Retained bonds from securitizations		7.41			5.25		8.84		—		5.56
Collateralized mortgage obligations		7.73			4.98		4.25		—		4.87
Commercial mortgage-backed		5.19			7.02		5.05		6.06		5.86
Other		6.34			5.24		4.82		—		5.38
State, county and municipal		8.05			8.70		8.63		6.96		7.59
Sundry		4.86			5.42		4.30		5.11		4.78
Consolidated		5.48	%		5.63		5.01		5.59		5.19

56

     At March 31, 2006, all securities were classified as available for sale.

     At March 31, 2006, mortgage-backed securities included Federal National Mortgage Association and Federal Home Loan Mortgage Corporation securities with an amortized cost of $59.1 billion and a market value of $57.6 billion, and an amortized cost of $18.7 billion and a market value of $18.2 billion, respectively. Also included in mortgage-backed securities are U.S. Government agency and Government-sponsored entity securities retained from the securitization of residential mortgage loans. These securities had an amortized cost and market value of $2.0 billion at March 31, 2006.

     Included in asset-backed securities are retained bonds primarily from the securitization of commercial and consumer real estate, SBA and auto loans. At March 31, 2006, retained bonds with an amortized cost and a market value of $2.9 billion were considered investment grade based on external ratings. Retained bonds with an amortized cost and market value of $2.2 billion at March 31, 2006, had an external credit rating of AA and above.

     Securities with an aggregate amortized cost of $60.0 billion at March 31, 2006, are pledged to secure U.S. Government and other public deposits and for other purposes as required by various statutes or agreements.

     Expected maturities of beneficial interest and the contractual maturities of all other securities are summarized in the table. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Average maturity excludes equity securities and money market funds.

     Yields related to securities exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 35 percent and applicable state tax rates.

     At March 31, 2006, there were forward commitments to purchase securities on both a regular way and non-regular way basis at a cost that approximates a market value of $4.8 billion. At March 31, 2006, there were commitments to sell securities at a cost that approximates a market value of $2.5 billion.

     On a quarterly basis, the Company makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis. The Company considers many factors including the severity and duration of the impairment; the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value; recent events specific to the issuer or industry; and for debt securities, external credit ratings and recent downgrades. Securities on which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value with the write-down recorded as a realized loss in securities gains (losses).

     Gross unrealized losses at March 31, 2006, are primarily caused by interest rate changes. The Company has reviewed these securities in accordance with its accounting policy for other-than-temporary impairment discussed above and does not consider them other-than-temporarily impaired.

     Gross gains and losses realized on the sale of debt securities in the three months ended March 31, 2006, were $56 million and $124 million (including $12 million of impairment losses), respectively, and gross gains and losses realized on the sale of equity securities were $21 million and $1 million (no impairment losses), respectively.

57

NOTE 3: SERVICING ASSETS

     In connection with certain transactions where the Company securitizes and sells originated or purchased loans with servicing retained, servicing assets or liabilities are recorded based on the relative fair value of the servicing rights on the date the loans are sold. The Company also purchases certain servicing assets. Servicing assets recorded at amortized cost are amortized in proportion to and over the estimated period of net servicing income.

     The Company adopted Statement of Financial Accounting Standards (SFAS) No. 156, “Accounting for Servicing of Financial Assets,” effective January 1, 2006. SFAS 156 requires that all servicing assets and liabilities initially be recognized at fair value, rather than based on an allocated fair value amount. Additionally, SFAS 156 permits entities to choose to recognize individual classes of servicing assets at fair value on an ongoing basis, with subsequent changes in fair value recorded in earnings. The Company determined its classes of servicing assets based on the asset type being serviced along with the methods used to manage the risk inherent in the servicing assets, which includes the market inputs used to value the servicing assets. The risks inherent in these servicing assets vary based on asset class but include changes in market interest rates, prepayments, default rates and cost to service in event of default, among other factors. The Company elected to record a class of originated residential mortgage servicing assets at fair value on an ongoing basis with the adoption of SFAS 156. Accordingly, the Company has recorded a $41 million after-tax cumulative effect adjustment to beginning retained earnings, as required by SFAS 156, for the difference between the carrying amount of originated residential mortgage servicing assets and their fair value at the date of adoption. Valuation of the originated residential mortgage servicing assets recorded at fair value is estimated using discounted cash flows with prepayment speeds and discount rates as significant assumptions. At March 31, 2006, the weighted average prepayment speed assumption was 14.11 percent and the weighted average discount rate used was 10.67 percent. Valuation of the servicing assets recorded on an amortized cost basis is also estimated using discounted cash flows with key assumptions including prepayment speeds, discount rates, estimated default rates and cost to service. Servicing assets recorded at amortized cost are periodically evaluated for impairment based on the fair value of those assets. If, by individual stratum, the carrying amount of servicing assets exceeds fair value, a valuation reserve is established. The valuation reserve is adjusted as the fair value changes. For purposes of impairment evaluation and measurement, the Company stratifies servicing assets based on predominant risk characteristics of the underlying loans, including loan type, amortization type, loan coupon rate, and in certain circumstances, period of origination.

     Servicing fee income in the three months ended March 31, 2006, was $109 million and is included in other banking fees on the consolidated statements of income. Changes in the fair value and amortization of servicing assets are included in other banking fees. The change in the fair value of originated residential mortgage servicing assets and the change in the carrying amount of servicing assets which are recorded at amortized cost in the three months ended March 31, 2006, are presented below.

	Three Months Ended March 31, 2006
	Servicing Assets
	Fair Value			Amortized Cost
				Fixed Rate
	Originated			Commercial
	Residential			Mortgage-
(In millions)	Mortgages			Backed			Other			Total
Balance, December 31, 2005	$	195			372			400			967
Cumulative effect of an accounting change		64			—			—			64
Balance, January 1, 2006		259			372			400			1,031
Fair value of servicing assets purchased, assumed or originated, or retained from securitizations		35			68			56			159
Servicing sold or otherwise disposed of		(8	)		—			—			(8	)
Change in fair value due to changes in model inputs and/or assumptions		8			—			—			8
Other changes in fair value, primarily from fees earned		(12	)		—			—			(12	)
Amortization of servicing assets		—			(20	)		(43	)		(63	)
Impairment		—			—			(3	)		(3	)
Other		—			—			(8	)		(8	)
Balance, March 31, 2006	$	282			420			402			1,104
FAIR VALUE
December 31, 2005	$	259			516			512			1,287
March 31, 2006	$	282			576			526			1,384

58

NOTE 4: SHARE-BASED PAYMENTS

     The Company has stock option plans under which incentive and nonqualified stock options may be granted periodically to certain employees. The options are granted at an exercise price equal to the fair value of the underlying shares at the date of grant, vest based on continued service with the Company for a specified period, generally three years to five years following the date of grant, and have a contractual life of ten years. Restricted stock may also be granted under the stock option plans. The restricted stock generally vests over three years to five years, during which time the holder receives dividends and has full voting rights. Employee stock compensation expense was $194 million in the three months ended March 31, 2006, including $107 million related to restricted stock awards and $87 million related to stock option awards. The related income tax benefit in the three months ended March 31, 2006 was $68 million.

     At March 31, 2006, there was $662 million and $344 million of total unrecognized compensation costs related to restricted stock awards and stock option awards, respectively. Those costs are expected to be recognized over a weighted-average period of 1.5 years and 1.8 years, respectively. The fair value of restricted stock awards vested during the three months ended March 31, 2006 and March 31, 2005 was $158 million and $215 million, respectively. The total intrinsic value of stock option awards exercised during the three months ended March 31, 2006 and March 31, 2005 was $190 million and $92 million, respectively.

     The Company adopted the fair value method of accounting for stock options in 2002 and all awards made prior to January 1, 2002, had fully vested prior to December 31, 2005. Under this method, fair value is measured on the date of grant using the Black-Scholes option pricing model with market assumptions. This amount was amortized on a straight-line basis over the vesting period for all recipients. Accordingly, the primary impact to the Company from the implementation of SFAS 123 (revised) (“SFAS 123R”) “Share-Based Payments”, effective January 1, 2006, was the different treatment of awards to retirement-eligible employees, which must now be expensed in full at the date of grant, or from the date of grant to the date that an employee will become retirement-eligible, if that is before the end of the stated vesting period. Employee stock compensation expense in the three month ended March 31, 2006, includes $98 million associated with the implementation of SFAS 123R, primarily related to the impact of awards granted to employees that were retirement-eligible at the date of grant.

     At March 31, 2006, the Company had 65 million shares of common stock reserved for issuance under the stock option plans.

     The weighted average grant date fair value of options awarded under the stock option plans in the three months ended March 31, 2006, was $10.07. The more significant assumptions used in estimating the fair value of stock options include risk-free interest rates of 4.83 percent, dividend yield of 3.64 percent, volatility of the Company’s common stock of 18.87 percent, and weighted average expected lives of the stock options of 7.0 years. The Company calculated its volatility estimate from implied volatility of actively traded options on the Company’s stock with remaining maturities of two years. This represents a change from prior years, in which the Company calculated its volatility estimate based on historical volatility adjusted for significant changes in the Company’s business activities. The Company determined the estimated life using the simple average of the 10-year contractual term of the options and the vesting term (using an average of the 5-year graded vesting period). In prior years, the Company determined the estimated life based on historical share option experience.

     Stock award activity for the three months ended March 31, 2006, is presented below.

	March 31, 2006
				Weighted-
				Average
(Options and shares in thousands)	Number			Price (a)
STOCK OPTIONS
Options outstanding, beginning of period		133,870		$	38.67
Granted		13,871			50.19
Options of acquired entities		1,619			27.89
Exercised		(8,820	)		33.09
Expired		(105	)		43.47
Forfeited		(573	)		43.47
Options outstanding, end of period		139,862		$	40.28
Options exercisable, end of period		93,707		$	36.99
RESTRICTED STOCK
Unvested shares, beginning of period		14,055		$	48.59
Granted		5,603			56.19
Vested		(2,949	)		47.48
Forfeited		(173	)		46.94
Unvested shares, end of period		16,536		$	51.38

(a) The weighted-average price for stock options is the weighted-average exercise price of the options, and for restricted stock, the weighted-average fair value of the stock at the date of grant.

59

NOTE 5: COMPREHENSIVE INCOME

     Comprehensive income is defined as the change in equity from all transactions other than those with stockholders, and it includes net income and other comprehensive income. Comprehensive income for the three months ended March 31, 2006 and 2005, is presented below.

	Three Months Ended
	March 31,
(In millions)	2006			2005
COMPREHENSIVE INCOME
Net income	$	1,728			1,621
OTHER COMPREHENSIVE INCOME
Net unrealized holding loss on securities		(792	)		(786	)
Net unrealized loss on cash flow hedge derivatives		(23	)		(22	)
Total comprehensive income	$	913			813

60

NOTE 6: BUSINESS SEGMENTS (a)

     Business segment earnings are presented excluding merger-related and restructuring expenses, other intangible amortization, minority interest in consolidated subsidiaries, and the change in accounting principle. The Company believes that while these items apply to overall corporate operations, they are not meaningful to understanding or evaluating the performance of the Company’s individual business segments. The Company does not take these items into account as it manages business segment operations or allocates capital, and therefore, the Company’s GAAP segment presentation excludes these items. Also, for segment reporting purposes, net interest income reflects tax-exempt interest income on a tax-equivalent basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources.

     Business segment earnings are the primary measure of segment profit or loss that the Company uses to assess segment performance and to allocate resources. Economic profit, risk-adjusted return on capital (“RAROC”) and efficiency ratios are additional metrics, all of which are based on and calculated directly from segment earnings, that assist management in evaluating segment results.

     The Company continuously updates segment information for changes that occur in the management of the Company’s businesses. For example, in the first quarter of 2006, the Company transferred certain customer relationships and financial advisors to Wealth Management from Capital Management relating to a new investment platform in Wealth Management and have updated information for 2005 to reflect this and other changes. The impact to segment earnings in 2005 as a result of these changes was a $26 million decrease in the General Bank, a $5 million increase in Capital Management, a $7 million decrease in Wealth Management, a $2 million decrease in the Corporate and Investment Bank, and a $30 million increase in the Parent.

	Three Months Ended March 31, 2006
															Net Merger-
									Corporate						Related
									and						and
	General			Capital			Wealth		Investment						Restructuring
(Dollars in millions)	Bank			Management			Management		Bank			Parent			Expenses (c)			Total
CONSOLIDATED
Net interest income (b)	$	2,572			198			149		506			114			(49	)		3,490
Fee and other income		872			1,227			191		1,242			(15	)		—			3,517
Intersegment revenue		45			(11	)		1		(37	)		2			—			—
Total revenue (b)		3,489			1,414			341		1,711			101			(49	)		7,007
Provision for credit losses		62			—			—		1			(2	)		—			61
Noninterest expense		1,677			1,129			250		888			227			68			4,239
Minority interest		—			—			—		—			95			—			95
Income taxes (benefits)		628			104			33		281			(140	)		(22	)		884
Tax-equivalent adjustment		10			—			—		22			17			(49	)		—
Net income (loss)	$	1,112			181			58		519			(96	)		(46	)		1,728
Economic profit	$	866			139			41		332			(117	)		—			1,261
Risk adjusted return on capital		58.28	%		47.20			42.87		33.66			(6.68	)		—			39.22
Economic capital, average	$	7,431			1,555			516		5,941			2,677			—			18,120
Cash overhead efficiency ratio (b)		48.06	%		79.84			73.21		51.90			134.94			—			57.81
Lending commitments	$	115,788			237			6,229		103,812			516			—			226,582
Average loans, net		178,358			462			15,526		42,903			23,325			—			260,574
Average core deposits	$	216,375			28,671			14,557		25,324			5,287			—			290,214
FTE employees		45,443			17,107			4,771		5,669			24,144			—			97,134

61

	Three Months Ended March 31, 2005
																Net Merger-
										Corporate						Related
										and						and
	General			Capital			Wealth			Investment						Restructuring
(Dollars in millions)	Bank			Management			Management			Bank			Parent			Expenses (c)			Total
CONSOLIDATED
Net interest income (b)	$	2,329			152			140			590			263			(61	)		3,413
Fee and other income		684			1,137			151			979			44			—			2,995
Intersegment revenue		43			(11	)		2			(34	)		—			—			—
Total revenue (b)		3,056			1,278			293			1,535			307			(61	)		6,408
Provision for credit losses		57			—			(1	)		(3	)		(17	)		—			36
Noninterest expense		1,543			1,047			196			733			292			61			3,872
Minority interest		—			—			—			—			74			(10	)		64
Income taxes (benefits)		525			85			37			271			(83	)		(20	)		815
Tax-equivalent adjustment		9			—			—			28			24			(61	)		—
Net income	$	922			146			61			506			17			(31	)		1,621
Economic profit	$	686			106			45			344			(3	)		—			1,178
Risk adjusted return on capital		50.57	%		40.48			52.55			38.45			10.41			—			39.43
Economic capital, average	$	7,033			1,460			442			5,082			2,784			—			16,801
Cash overhead efficiency ratio (b)		50.48	%		81.97			67.16			47.77			57.65			—			57.15
Lending commitments	$	97,069			148			4,862			80,608			398			—			183,085
Average loans, net		159,641			322			12,829			36,515			11,868			—			221,175
Average core deposits	$	201,699			30,632			13,303			20,884			4,577			—			271,095
FTE employees		42,137			17,851			4,035			4,623			25,023			—			93,669

(a)	Certain amounts presented in periods prior to the first quarter of 2006 have been reclassified to conform to the presentation in the first quarter of 2006.
(b)	Tax-equivalent.
(c)	Tax-equivalent amounts are eliminated herein in order for “Total” amounts to agree with amounts appearing in the Consolidated Statements of Income.

62

NOTE 7: BASIC AND DILUTED EARNINGS PER COMMON SHARE

     The calculation of basic and diluted earnings per common share for the three months ended March 31, 2006 and 2005, is presented below.

	Three Months
	Ended March 31,
(In millions, except per share data)	2006		2005
Income available to common stockholders	$	1,728		1,621
Basic earnings per common share		1.11		1.03
Diluted earnings per common share	$	1.09		1.01
Average common shares — basic		1,555		1,571
Common share equivalents, unvested restricted stock		31		32
Average common shares — diluted		1,586		1,603

NOTE 8: DERIVATIVES (a)

     Risk management derivative financial instruments at March 31, 2006, are presented below.

	March 31, 2006
											In-			Average
	Notional		Gross Unrealized								effective-			Maturity in
(In millions)	Amount		Gains		Losses (f)			Equity (g)			ness (h)			Years (i)
ASSET HEDGES
Cash flow hedges (b)
Interest rate swaps—receive fixed	$	34,823		27		(672	)		(404	)		(7	)		3.72
Forward purchase commitments		174		—		—			—			—			0.03
Fair value hedges (c)
Interest rate swaps—pay fixed		1,773		71		—			—			2			16.57
Forward sale commitments		7,427		50		(4	)		—			2			0.09
Total asset hedges	$	44,197		148		(676	)		(404	)		(3	)		3.61
LIABILITY HEDGES
Cash flow hedges (d)
Interest rate swaps—pay fixed		29,744		530		(155	)		232			1			3.85
Interest rate options		17,500		3		—			2			—			1.00
Put options on Eurodollar futures		8,000		—		—			—			1			0.25
Eurodollar futures		22,250		10		—			6			1			0.25
Fair value hedges (e)
Interest rate swaps—receive fixed		19,957		—		(340	)		—			4			6.66
Total liability hedges		97,451		543		(495	)		240			7			2.80
Total	$	141,648		691		(1,171	)		(164	)		4			—

63

(a) Includes only derivative financial instruments related to interest rate risk management activities that have been designated and accounted for as accounting hedges. All other derivative financial instruments are classified as trading.

(b) Receive-fixed interest rate swaps with a notional amount of $34.8 billion, of which $9.2 billion are forward-starting, and with pay rates based on one-to-six month LIBOR are primarily designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of one-to-six month LIBOR-indexed loans. Forward purchase commitments of $174 million are designated as cash flow hedges of the variability of the consideration to be paid on the forecasted purchase of available for sale securities.

(c) Pay-fixed interest rate swaps with a notional amount of $1.8 billion and receive rates based on LIBOR are designated as fair value hedges of available for sale securities. Forward sale commitments of $7.0 billion and $427 million are designated as fair value hedges of available for sale securities and mortgage loans in the warehouse, respectively.

(d) Derivatives with a notional amount of $66.8 billion are designated as cash flow hedges of the variability in cash flows attributable to the forecasted issuance of fixed rate short-term liabilities that are part of a rollover strategy. Of this amount, $19.1 billion are pay-fixed interest rate swaps with receive rates based on one-to-three month LIBOR, of which $6.0 billion are forward-starting, $22.2 billion are Eurodollar futures, $8.0 billion are purchase put options on Eurodollar futures and $17.5 billion are LIBOR-based purchased interest rate options. Pay-fixed interest rate swaps with a notional amount of $10.7 billion, of which $2.0 billion are forward starting, and with rates based on one-to-six month LIBOR, are designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of long-term debt.

(e) Receive-fixed interest rate swaps with a notional amount of $20.0 billion and with pay rates based primarily on one-to-six month LIBOR are designated as fair value hedges of fixed rate liabilities, primarily long-term debt.

(f) Represents the fair value of derivative financial instruments less accrued interest receivable or payable.

(g) At March 31, 2006, the net unrealized loss on derivatives included in accumulated other comprehensive income, which is a component of stockholders’ equity, was $401 million, net of income taxes. Of this net of tax amount, a $164 million loss represents the effective portion of the net gains (losses) on derivatives that qualify as cash flow hedges, and a $237 million loss relates to terminated and/or redesignated derivatives. At March 31, 2006, $57 million of net losses, net of income taxes, recorded in accumulated other comprehensive income, is expected to be reclassified as interest income or expense during the next twelve months. The maximum length of time over which cash flow hedges are hedging the variability in future cash flows associated with the forecasted transactions is 20.10 years.

(h) In the three months ended March 31, 2006, gains in the amount of $4 million were recognized in other fee income representing the ineffective portion of the net gains (losses) on derivatives that qualify as cash flow and fair value hedges. This amount also includes the time value of options, which is excluded from the assessment of hedge effectiveness. In addition, net interest income in the three months ended March 31, 2006, decreased by $7 million representing ineffectiveness of cash flow hedges caused by differences between the critical terms of the derivative and the hedged item, primarily differences in reset dates.

(i) Estimated maturity approximates average life.

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     Expected maturities of risk management derivative financial instruments at March 31, 2006, are presented below.

	March 31, 2006
	1 Year			1-2			2-5			5-10			After 10
(In millions)	or Less			Years			Years			Years			Years			Total
CASH FLOW ASSET HEDGES
Notional amount — swaps—receive fixed	$	5,718			2,058			13,708			13,339			—			34,823
Notional amount — other	$	174			—			—			—			—			174
Weighted average receive rate (a)		3.67	%		3.78			4.48			5.03			—			4.41
Weighted average pay rate (a)		4.87	%		4.61			4.83			4.88			—			4.84
Unrealized gain (loss)	$	(22	)		(50	)		(285	)		(288	)		—			(645	)
FAIR VALUE ASSET HEDGES
Notional amount — swaps—pay fixed	$	17			—			10			263			1,483			1,773
Notional amount — other	$	7,427			—			—			—			—			7,427
Weighted average receive rate (a)		4.53	%		—			4.69			3.20			3.14			3.14
Weighted average pay rate (a)		2.93	%		—			4.07			3.41			3.73			3.67
Unrealized gain (loss)	$	47			—			—			4			66			117
CASH FLOW LIABILITY HEDGES
Notional amount — swaps—pay fixed	$	11,848			3,290			2,548			9,852			2,206			29,744
Notional amount — other	$	40,900			6,850			—			—			—			47,750
Weighted average receive rate (a)		4.82	%		4.91			4.68			4.86			4.75			4.83
Weighted average pay rate (a)		3.97	%		3.88			6.85			5.07			5.88			4.42
Unrealized gain (loss)	$	111			53			26			293			(95	)		388
FAIR VALUE LIABILITY HEDGES
Notional amount — swaps—receive fixed	$	2,657			458			8,302			6,222			2,318			19,957
Weighted average receive rate (a)		5.43	%		4.80			4.87			4.78			5.45			4.98
Weighted average pay rate (a)		4.92	%		4.66			4.78			4.82			4.68			4.80
Unrealized gain (loss)	$	(16	)		(3	)		(79	)		(123	)		(119	)		(340	)

(a) Weighted average receive and pay rates include the impact of currently effective interest rate swaps only and not the impact of forward-starting interest rate swaps. All the interest rate swaps have variable pay or receive rates based on one-to-six month LIBOR, and they are the pay or receive rates in effect at March 31, 2006.

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     Activity related to risk management derivative financial instruments for the three months ended March 31, 2006, is presented below.

	March 31, 2006
	Asset			Liability
(In millions)	Hedges			Hedges			Total
Balance, December 31, 2005	$	50,360			90,948			141,308
Additions		30,329			28,528			58,857
Maturities and amortizations		(4,289	)		(12,300	)		(16,589	)
Terminations		(21,834	)		(1,449	)		(23,283	)
Redesignations and transfers to trading account assets		(10,369	)		(8,276	)		(18,645	)
Balance, March 31, 2006	$	44,197			97,451			141,648

NOTE 9: GUARANTEES

	March 31, 2006				December 31, 2005
			Maximum				Maximum
	Carrying		Risk of		Carrying		Risk of
(In millions)	Amount		Loss		Amount		Loss
Securities and other lending indemnifications	$	—		64,579		—		62,597
Standby letters of credit		110		35,222		108		35,568
Liquidity agreements		9		28,723		8		27,193
Loans sold with recourse		39		6,062		47		9,322
Residual value guarantees on operating leases		—		1,111		—		1,109
Written put options		117		9,132		133		8,337
Contingent consideration		—		212		—		264
Total guarantees	$	275		145,041		296		144,390

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