EX-99.A 2 dex99a.htm PRESS RELEASE Press Release

Exhibit (99)(a)

 

LOGO         LOGO
          Press Release July 19, 2005

 

WACHOVIA EARNS RECORD $1.04 PER SHARE IN 2nd QUARTER 2005, UP 9%

 

Strong expense discipline, outstanding credit quality and record customer service drive net income to record $1.65 billion

 

2nd QUARTER 2005 COMPARED WITH 2nd QUARTER 2004

 

  •   Record net income up 32 percent as revenues rose at twice the pace of expenses. Results include the impact of acquisitions.

 

  •   Merger savings and expense discipline drove a 417 basis point improvement in the overhead efficiency ratio to 59.29 percent.

 

  •   Credit quality continued to be exceptional with annualized net charge-offs of 0.09 percent of average loans and total nonperforming assets at a record low 0.44 percent of loans, foreclosed properties and loans held for sale.

 

  •   Solid sales activity, good merger integration progress and record customer satisfaction and loyalty overcame challenging industry trends.

 

Earnings Highlights

 

     Three Months Ended
     June 30,
    March 31,
    June 30,

(In millions, except per share data)

    Amount
    

2005

EPS

    Amount
   

2005

EPS

    Amount
   

2004

EPS

Earnings

                                 

Net income (GAAP)

    $ 1,650     1.04    1,621    1.01    1,252    0.95

Net merger-related expenses

      48     0.03    31    0.02    47    0.03
    
 
  
  
  
  

Earnings excluding net merger-related expenses

    $ 1,698     1.07    1,652    1.03    1,299    0.98
    
 
  
  
  
  

Financial ratios

                                 

Return on average common stockholders’ equity

      14.04 %        13.92         15.49     

Net interest margin (a)

      3.23          3.31         3.37     

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

      46.60          46.30         47.33     

Overhead efficiency ratio (a)

      59.29 %        59.86         63.46     
    
      
       
    

Capital adequacy (b)

                                 

Tier 1 capital ratio

      7.89 %        7.91         8.36     

Total capital ratio

      11.29          11.40         11.02     

Leverage ratio

      6.10 %        5.99         6.23     
    
      
       
    

Asset quality

                                 

Allowance for loan losses as % of nonaccrual and restructured loans

      332 %        300         270     

Allowance for loan losses as % of loans, net

      1.18          1.20         1.35     

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

      1.25          1.27         1.43     

Net charge-offs as % of average loans, net

      0.09          0.08         0.17     

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

      0.44 %        0.50         0.55     
(a) Tax-equivalent.
(b) The second quarter of 2005 is based on estimates.
(c) The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments.

 

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WACHOVIA EARNS $1.04 PER SHARE IN 2nd QUARTER 2005, UP 9%/page 2

 

CHARLOTTE, N.C. — Wachovia Corp. (NYSE:WB) today reported record net income of $1.65 billion, or a record $1.04 per share, in the second quarter of 2005 compared with $1.25 billion, or 95 cents per share, in the second quarter of 2004.

 

Excluding after-tax net merger-related expenses of 3 cents per share in the second quarter of both years, second quarter 2005 earnings were $1.70 billion, or a record $1.07 per share, compared with $1.30 billion, or 98 cents per share, in the second quarter of 2004.

 

“Our team generated excellent second quarter results by focusing on the right things: serving our customers and maintaining expense discipline,” said Ken Thompson, Wachovia chairman and chief executive officer. “We’re seeing great execution on our revenue strategies and expense initiatives, which produced a dramatic improvement in our overhead efficiency ratio. Once again, our diversified business model produced record results despite the industry-wide narrowing of net interest margins and weak retail brokerage and trading environment. In addition, we’re benefiting from the smooth integration of SouthTrust, which continues on track and on budget. I’m confident we’re building a strong foundation for future growth.”

 

Wachovia Corporation

 

     Three Months Ended

(In millions)

    June 30,
2005
    March 31,
2005
    June 30,
2004

Total revenue (Tax-equivalent)

    $ 6,388    6,469    5,510

Provision for credit losses

      50    36    61

Noninterest expense

      3,788    3,872    3,495

Net income

      1,650    1,621    1,252

Average loans, net

      223,881    221,175    163,642

Average core deposits

    $ 275,338    271,095    223,809

 

In the second quarter of 2005 compared with the second quarter of 2004, Wachovia:

 

  •   Increased revenue 16 percent. Revenue growth largely reflected the acquisitions of SouthTrust Corporation on November 1, 2004, and the Palmer & Cay, Inc., insurance brokerage firm on May 6, 2005.

 

  •   Higher loans and deposits, largely related to SouthTrust, boosted net interest income 17 percent.

 

  •   Fee and other income grew 14 percent. In addition to the acquisition impact, growth reflected stronger service charges, investment banking fees, asset securitizations and securities gains, partially offset by lower retail brokerage commissions and weaker trading profits.

 

  •   Achieved merger and other expense efficiencies, limiting noninterest expense growth to 8 percent.

 

  •   Had a provision for credit losses of $50 million. Net charge-offs declined 25 percent to $51 million, or an annualized 0.09 percent of average net loans. Total nonperforming assets including loans held for sale were $1.07 billion, or 0.44 percent of loans, foreclosed properties and loans held for sale at June 30, 2005.

 

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WACHOVIA EARNS $1.04 PER SHARE IN 2nd QUARTER 2005, UP 9%/page 3

 

Lines of Business

 

The following discussion covers the results for Wachovia’s four core business segments and is on a segment earnings basis, which excludes net merger-related and restructuring expenses and other intangible amortization. Segment earnings are the basis on which Wachovia manages and allocates capital to its business segments. Pages 13 and 14 include a reconciliation of segment results to Wachovia’s consolidated results of operations in accordance with GAAP.

 

General Bank

 

General Bank Highlights

 

     Three Months Ended

(In millions)

    June 30,
2005
     March 31,
2005
    June 30,
2004

Total revenue (Tax-equivalent)

    $ 3,142     3,086    2,532

Provision for credit losses

      68     57    65

Noninterest expense

      1,515     1,544    1,305

Segment earnings

    $ 988     939    740

Cash overhead efficiency ratio (Tax-equivalent)

      48.18 %   50.06    51.54

Average loans, net

    $ 161,609     159,376    122,108

Average core deposits

      205,495     201,487    166,021

Economic capital, average

    $ 6,981     7,063    5,167

 

The General Bank includes retail, small business and commercial customers. Results include the impact of the fourth quarter 2004 acquisition of SouthTrust. Key General Bank trends in the second quarter of 2005 compared with the second quarter of 2004 included:

 

  •   24 percent revenue growth driven by 27 percent higher net interest income and 14 percent higher fee and other income, largely due to SouthTrust.

 

  •   Strength in low-cost core deposits as well as higher commercial and consumer loans largely related to SouthTrust drove the increase in net interest income.

 

  •   Increased fee and other income, in addition to SouthTrust, was driven by strong debit card interchange income, offset by continued weakness primarily in commercial service charges.

 

  •   16 percent growth in noninterest expense due to SouthTrust.

 

  •   Strong expense management and merger efficiencies, which drove improvement in the overhead efficiency ratio to a record 48.18 percent.

 

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WACHOVIA EARNS $1.04 PER SHARE IN 2nd QUARTER 2005, UP 9%/page 4

 

Capital Management

 

Capital Management Highlights

 

     Three Months Ended

(In millions)

    June 30,
2005
     March 31,
2005
    June 30,
2004

Total revenue (Tax-equivalent)

    $ 1,337     1,336    1,360

Provision for credit losses

      —       —      —  

Noninterest expense

      1,089     1,093    1,141

Segment earnings

    $ 157     154    139

Cash overhead efficiency ratio (Tax-equivalent)

      81.48 %   81.81    83.90

Average loans, net

    $ 689     641    522

Average core deposits

      31,160     32,367    25,533

Economic capital, average

    $ 1,394     1,412    1,380

 

Capital Management includes retail brokerage services and asset management. Key Capital Management trends in the second quarter of 2005 compared with the second quarter of 2004 included:

 

  •   Relatively flat revenue was offset by lower expenses to deliver 13 percent earnings growth.

 

  •   Fee and other income was dampened by sluggish retail brokerage transaction activity, which largely offset an increase in recurring and other income. Fee income in the second quarter this year was lower than a year ago by $21 million from divested businesses.

 

  •   Net interest income growth of 19 percent largely due to average core deposits growth of 22 percent primarily related to the FDIC-insured money market sweep product.

 

  •   A 5 percent decline in expenses primarily due to efficiencies gained from the now-completed retail brokerage integration, driving a 242 basis point improvement in the overhead efficiency ratio.

 

  •   Total assets under management of $254.0 billion at June 30, 2005, which were essentially stable from December 31, 2004. Positive equity mutual fund sales were offset by declining equity market valuations.

 

  •   Total brokerage client assets reached a record $655.6 billion at June 30, 2005.

 

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WACHOVIA EARNS $1.04 PER SHARE IN 2nd QUARTER 2005, UP 9%/page 5

 

Wealth Management

 

Wealth Management Highlights

 

     Three Months Ended

(In millions)

    June 30,
2005
     March 31,
2005
     June 30,
2004

Total revenue (Tax-equivalent)

    $ 329     288     272

Provision for credit losses

      —       (1 )   —  

Noninterest expense

      222     191     193

Segment earnings

    $ 68     62     51

Cash overhead efficiency ratio (Tax-equivalent)

      67.39 %   66.24     70.89

Average loans, net

    $ 13,546     12,801     10,593

Average core deposits

      13,192     13,255     11,835

Economic capital, average

    $ 522     480     458

 

Wealth Management includes private banking, personal trust, investment advisory services, charitable services, financial planning and insurance brokerage. Results include the impact of the May 6, 2005, acquisition of Palmer & Cay, Inc., an insurance brokerage firm. Key Wealth Management trends in the second quarter of 2005 compared with the second quarter of 2004 included:

 

  •   Strong revenue growth driven by a 21 percent increase in both net interest income and fee and other income.

 

  •   Net interest income growth was fueled by strength in both consumer and commercial lending and growth in average core deposits. Compared with the first quarter of 2005, average core deposits were essentially flat as growth was offset by a shift in money market deposits to off-balance sheet investment alternatives.

 

  •   Fee and other income growth included $30 million from the Palmer & Cay acquisition. In addition, higher trust and investment management fees and insurance commissions offset a decline in commercial service charges.

 

  •   15 percent expense growth, which included $26 million related to the Palmer & Cay acquisition.

 

  •   350 basis point improvement in the overhead efficiency ratio.

 

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WACHOVIA EARNS $1.04 PER SHARE IN 2nd QUARTER 2005, UP 9%/page 6

 

Corporate and Investment Bank

 

Corporate and Investment Bank Highlights

 

     Three Months Ended
  

(In millions)

    June 30,
2005
     March 31,
2005
     June 30,
2004
  

Total revenue (Tax-equivalent)

    $ 1,272     1,534     1,286  

Provision for credit losses

      (8 )   (3 )   (4 )

Noninterest expense

      711     732     619  

Segment earnings

    $ 357     506     424  

Cash overhead efficiency ratio (Tax-equivalent)

      55.85 %   47.73     48.11  

Average loans, net

    $ 37,972     36,916     29,552  

Average core deposits

      22,505     20,883     17,927  

Economic capital, average

    $ 5,483     5,109     4,505  

 

The Corporate and Investment Bank includes corporate lending, investment banking, and treasury and international trade finance. Key trends in Corporate and Investment Bank second quarter 2005 results compared with the second quarter of 2004 included:

 

  •   A slight decline in revenue as higher fee and other income was more than offset by lower net interest income.

 

  •   Net interest income declined 13 percent due primarily to higher funding costs resulting from the second quarter 2004 resolution of tax matters relating to our commercial leasing portfolio.

 

  •   Fee income increased 11 percent on 29 percent growth in advisory and underwriting results, driven by strong merger and acquisition advisory activity, loan syndications and investment grade underwriting, and higher other income, including growth in asset-backed/structured products.

 

  •   A 15 percent increase in noninterest expense due primarily to increased strategic hiring in key positions. Increased expense and slightly lower revenue resulted in a higher overhead efficiency ratio.

 

  •   Strong core deposit growth primarily from higher commercial mortgage servicing and international money market deposits and increased loans primarily reflecting higher leasing balances due to the income tax settlement and to SouthTrust.

 

  •   Economic capital usage increased due to higher loan balances and an increased expense base.

 

***

 

Wachovia Corporation (NYSE:WB) is one of the largest providers of financial services to retail, brokerage and corporate customers, with retail operations from Connecticut to Florida and west to Texas, and retail brokerage operations nationwide. Wachovia had assets of $511.8 billion, market capitalization of $78.2 billion and stockholders’ equity of $47.9 billion at June 30, 2005. Its four core businesses, the General Bank, Capital Management, Wealth Management, and the Corporate and Investment Bank, serve 13 million household and business relationships primarily through 3,126 offices in 15 states and Washington, D.C. Its full-service retail brokerage firm, Wachovia Securities, LLC, also serves clients through 699 offices in 49 states and five Latin American countries. Our Corporate and Investment Bank serves clients primarily in 10 key industry sectors nationwide. Global services are offered through 33 international offices. Online banking and brokerage products and services also are available through Wachovia.com.

 

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WACHOVIA EARNS $1.04 PER SHARE IN 2nd QUARTER 2005, UP 9%/page 7

 

Forward-Looking Statements

 

This news release contains various forward-looking statements. A discussion of various factors that could cause Wachovia Corporation’s actual results to differ materially from those expressed in such forward-looking statements is included in Wachovia’s filings with the Securities and Exchange Commission, including its Current Report on Form 8-K dated July 19, 2005.

 

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

 

In addition to results presented in accordance with GAAP, this news release includes certain non-GAAP financial measures, including those presented on page 1 and on page 10 under the captions “Earnings Excluding Merger-Related and Restructuring Expenses” and “Earnings Excluding Merger-Related and Restructuring Expenses, and Other Intangible Amortization”, and which are reconciled to GAAP financial measures on pages 21 and 22. In addition, in this news release certain designated net interest income amounts are presented on a tax-equivalent basis, including the calculation of the overhead efficiency ratio.

 

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

 

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

 

Earnings Conference Call and Supplemental Materials

 

Wachovia CEO Ken Thompson and CFO Bob Kelly will review Wachovia’s second quarter 2005 results in a conference call and audio webcast beginning at 10 a.m. Eastern Daylight Savings Time today. This review may include a discussion of certain non-GAAP financial measures. Supplemental materials relating to second quarter results, which also include a reconciliation of any non-GAAP measures to Wachovia’s reported financials, are available on the Internet at Wachovia.com/investor, and investors are encouraged to access these materials in advance of the conference call.

 

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

 

Teleconference Instructions: The telephone number for the conference call is 1-888-357-9787 for U.S. callers or 1-706-679-7342 for international callers. You will be asked to tell the answering coordinator your name and the name of your firm. Mention the conference Access Code: Wachovia.

 

Replay: Tuesday, July 19, at 12 p.m. EDT and continuing through 5 p.m. EDT Friday, August 19. Replay telephone number is 1-706-645-9291; access code 6891035.

 

***

 

Investors seeking further information should contact the Investor Relations team: Alice Lehman at 704-374-4139, Ellen Taylor at 704-383-1381 or Jeff Richardson at 704-383-8250. Media seeking further information should contact the Corporate Media Relations team: Mary Eshet at 704-383-7777 or Christy Phillips at 704-383-8178.

 

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PAGE 8

 

WACHOVIA CORPORATION AND SUBSIDIARIES

FINANCIAL TABLES

 

TABLE OF CONTENTS

 

     PAGE

Financial Highlights—Five Quarters Ended June 30, 2005

    9

Other Financial Data—Five Quarters Ended June 30, 2005

    10

Consolidated Statements of Income—Five Quarters Ended June 30, 2005

    11

Consolidated Statements of Income—Six Months Ended June 30, 2005 and 2004

    12

Business Segments—Three Months Ended June 30, 2005 and March 31, 2005

    13

Business Segments—Three Months Ended June 30, 2004

    14

Loans—On-Balance Sheet, and Managed and Servicing Portfolios—Five Quarters Ended June 30, 2005

    15

Allowance for Loan Losses and Nonperforming Assets—Five Quarters Ended June 30, 2005

    16

Consolidated Balance Sheets—Five Quarters Ended June 30, 2005

    17

Net Interest Income Summaries—Five Quarters Ended June 30, 2005

    18-19

Net Interest Income Summaries—Six Months Ended June 30, 2005 and 2004

    20

Reconciliation of Certain Non-GAAP Financial Measures—Five Quarters Ended June 30, 2005

    21-22

 

 

PAGE 9

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

FINANCIAL HIGHLIGHTS

(Unaudited)

 

     2005
    2004
  

(Dollars in millions, except per share data)

    Second
Quarter
     First
Quarter
    Fourth
Quarter
    Third
Quarter
     Second
Quarter
  

EARNINGS SUMMARY

                               

Net interest income (GAAP)

    $ 3,358     3,413    3,297    2,965     2,838  

Tax-equivalent adjustment

      53     61    60    63     65  
    
 
  
  
 

Net interest income (Tax-equivalent)

      3,411     3,474    3,357    3,028     2,903  

Fee and other income

      2,977     2,995    2,804    2,601     2,607  
    
 
  
  
 

Total revenue (Tax-equivalent)

      6,388     6,469    6,161    5,629     5,510  

Provision for credit losses

      50     36    109    43     61  

Other noninterest expense

      3,591     3,696    3,605    3,445     3,286  

Merger-related and restructuring expenses

      90     61    116    127     102  

Other intangible amortization

      107     115    113    99     107  
    
 
  
  
 

Total noninterest expense

      3,788     3,872    3,834    3,671     3,495  

Minority interest in income of consolidated subsidiaries

      71     64    54    28     45  
    
 
  
  
 

Income before income taxes (Tax-equivalent)

      2,479     2,497    2,164    1,887     1,909  

Tax-equivalent adjustment

      53     61    60    63     65  

Income taxes

      776     815    656    561     592  
    
 
  
  
 

Net income

    $ 1,650     1,621    1,448    1,263     1,252  
    
 
  
  
 

Diluted earnings per common share

    $ 1.04     1.01    0.95    0.96     0.95  

Return on average common stockholders’ equity

      14.04 %   13.92    13.50    15.12     15.49  

Return on average assets

      1.31     1.31    1.22    1.18     1.22  

Overhead efficiency ratio

      59.29 %   59.86    62.23    65.20     63.46  

Operating leverage

    $ 5     269    368    (55 )   (11 )
    
 
  
  
 

ASSET QUALITY

                               

Allowance for loan losses as % of loans, net

      1.18 %   1.20    1.23    1.33     1.35  

Allowance for loan losses as % of nonperforming assets

      284     262    251    258     241  

Allowance for credit losses as % of loans, net

      1.25     1.27    1.30    1.41     1.43  

Net charge-offs as % of average loans, net

      0.09     0.08    0.23    0.15     0.17  

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

      0.44 %   0.50    0.53    0.50     0.55  
    
 
  
  
 

CAPITAL ADEQUACY (a)

                               

Tier I capital ratio

      7.89 %   7.91    8.01    8.34     8.36  

Total capital ratio

      11.29     11.40    11.11    11.22     11.02  

Leverage ratio

      6.10 %   5.99    6.38    6.21     6.23  
    
 
  
  
 

OTHER DATA

                               

Average diluted common shares (In millions)

      1,591     1,603    1,518    1,316     1,320  

Actual common shares (In millions)

      1,577     1,576    1,588    1,308     1,309  

Dividends paid per common share

    $ 0.46     0.46    0.46    0.40     0.40  

Dividend payout ratio on common shares

      44.23 %   45.54    48.42    41.67     42.11  

Book value per common share

    $ 30.37     29.48    29.79    25.92     24.93  

Common stock price

      49.60     50.91    52.60    46.95     44.50  

Market capitalization

    $ 78,236     80,256    83,537    61,395     58,268  

Common stock price to book value

      163 %   173    177    181     178  

FTE employees

      93,385     93,669    96,030    84,503     85,042  

Total financial centers/brokerage offices

      3,825     3,970    3,971    3,215     3,239  

ATMs

      5,089     5,234    5,321    4,395     4,396  
    
 
  
  
 
(a) The second quarter of 2005 is based on estimates.

 

PAGE 10

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

OTHER FINANCIAL DATA

(Unaudited)

 

     2005
    2004
  

(In millions)

    Second
Quarter
     First
Quarter
    Fourth
Quarter
    Third
Quarter
     Second
Quarter
  

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

                               

Return on average common stockholders’ equity

      14.43 %   14.19    13.95    15.72     16.04  

Return on average assets

      1.35     1.34    1.26    1.24     1.27  

Overhead efficiency ratio

      57.87     58.92    60.34    62.96     61.60  

Overhead efficiency ratio excluding brokerage

      52.87 %   54.14    55.01    57.56     55.50  

Operating leverage

    $ 35     214    358    (30 )   (8 )
    
 
  
  
 

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

                               

Dividend payout ratio on common shares

      41.44 %   42.59    44.23    38.10     38.83  

Return on average tangible common stockholders’ equity

      29.50     28.86    26.59    26.28     27.15  

Return on average tangible assets

      1.48     1.46    1.38    1.33     1.38  

Overhead efficiency ratio

      56.19     57.15    58.50    61.20     59.66  

Overhead efficiency ratio excluding brokerage

      50.86 %   52.03    52.78    55.43     53.12  

Operating leverage

    $ 27     215    373    (38 )   (13 )
    
 
  
  
 

OTHER FINANCIAL DATA

                               

Net interest margin

      3.23 %   3.31    3.37    3.36     3.37  

Fee and other income as % of total revenue

      46.60     46.30    45.50    46.21     47.33  

Effective income tax rate

      32.02     33.42    31.20    30.71     32.19  

Tax rate (Tax-equivalent) (d)

      33.50 %   35.05    33.14    33.04     34.44  
    
 
  
  
 

AVERAGE BALANCE SHEET DATA

                               

Commercial loans, net

    $ 131,195     127,703    116,599    96,860     92,107  

Consumer loans, net

      92,686     93,472    79,928    71,692     71,535  

Loans, net

      223,881     221,175    196,527    168,552     163,642  

Earning assets

      422,534     421,047    397,490    359,909     344,847  

Total assets

      503,361     500,486    472,431    424,399     411,074  

Core deposits

      275,338     271,095    260,627    232,989     223,809  

Total deposits

      297,194     294,674    280,051    248,245     238,692  

Interest-bearing liabilities

      367,828     365,516    343,489    314,310     301,652  

Stockholders’ equity

    $ 47,114     47,231    42,644    33,246     32,496  
    
 
  
  
 

PERIOD-END BALANCE SHEET DATA

                               

Commercial loans, net

    $ 136,115     134,696    131,196    102,524     101,581  

Consumer loans, net

      94,172     92,570    92,644    71,980     71,336  

Loans, net

      230,287     227,266    223,840    174,504     172,917  

Goodwill and other intangible assets

                               

Goodwill

      21,861     21,635    21,526    11,481     11,481  

Deposit base

      861     951    1,048    484     568  

Customer relationships

      427     387    443    372     387  

Tradename

      90     90    90    90     90  

Total assets

      511,840     506,833    493,324    436,698     418,441  

Core deposits

      275,281     273,883    274,588    237,315     228,204  

Total deposits

      299,910     297,657    295,053    252,981     243,380  

Stockholders’ equity

    $ 47,904     46,467    47,317    33,897     32,646  
    
 
  
  
 
(a) These financial measures are calculated by excluding from GAAP computed net income presented on page 9, $48 million, $31 million, $53 million, $55 million and $47 million in the second and first quarters of 2005, and in the fourth, third and second quarters of 2004, respectively, of after-tax net merger-related and restructuring expenses.
(b) See page 9 for the most directly comparable GAAP financial measure and pages 21 and 22 for a more detailed reconciliation.
(c) These financial measures are calculated by excluding from GAAP computed net income presented on page 9, $69 million, $72 million, $74 million, $62 million and $67 million in the second and first quarters of 2005, and in the fourth, third and second quarters of 2004, respectively, of after-tax deposit base and other intangible amortization.
(d) The tax-equivalent tax rate applies to fully tax-equivalized revenues.

 

PAGE 11

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     2005
     2004

(In millions, except per share data)

    Second
Quarter
    First
Quarter
     Fourth
Quarter
     Third
Quarter
     Second
Quarter

INTEREST INCOME

                              

Interest and fees on loans

    $ 3,362    3,174     2,814     2,393     2,316

Interest and dividends on securities

      1,437    1,426     1,232     1,156     1,110

Trading account interest

      354    378     388     325     237

Other interest income

      549    475     535     427     356
    
  
 
 
 

Total interest income

      5,702    5,453     4,969     4,301     4,019
    
  
 
 
 

INTEREST EXPENSE

                              

Interest on deposits

      1,221    1,050     860     691     654

Interest on short-term borrowings

      670    601     492     396     316

Interest on long-term debt

      453    389     320     249     211
    
  
 
 
 

Total interest expense

      2,344    2,040     1,672     1,336     1,181
    
  
 
 
 

Net interest income

      3,358    3,413     3,297     2,965     2,838

Provision for credit losses

      50    36     109     43     61
    
  
 
 
 

Net interest income after provision for credit losses

      3,308    3,377     3,188     2,922     2,777
    
  
 
 
 

FEE AND OTHER INCOME

                              

Service charges

      528    513     519     499     489

Other banking fees

      355    351     343     313     301

Commissions

      603    599     620     568     657

Fiduciary and asset management fees

      728    714     700     668     700

Advisory, underwriting and other investment banking fees

      257    233     271     237     203

Trading account profits (losses)

      17    99     (16 )   (60 )   34

Principal investing

      41    59     7     201     15

Securities gains (losses)

      136    (2 )   23     (71 )   36

Other income

      312    429     337     246     172
    
  
 
 
 

Total fee and other income

      2,977    2,995     2,804     2,601     2,607
    
  
 
 
 

NONINTEREST EXPENSE

                              

Salaries and employee benefits

      2,324    2,401     2,239     2,118     2,164

Occupancy

      271    250     260     234     224

Equipment

      269    265     272     268     253

Advertising

      48    44     51     46     48

Communications and supplies

      158    162     163     149     157

Professional and consulting fees

      155    127     179     134     126

Other intangible amortization

      107    115     113     99     107

Merger-related and restructuring expenses

      90    61     116     127     102

Sundry expense

      366    447     441     496     314
    
  
 
 
 

Total noninterest expense

      3,788    3,872     3,834     3,671     3,495
    
  
 
 
 

Minority interest in income of consolidated subsidiaries

      71    64     54     28     45
    
  
 
 
 

Income before income taxes

      2,426    2,436     2,104     1,824     1,844

Income taxes

      776    815     656     561     592
    
  
 
 
 

Net income

    $ 1,650    1,621     1,448     1,263     1,252
    
  
 
 
 

PER COMMON SHARE DATA

                              

Basic earnings

    $ 1.05    1.03     0.97     0.97     0.96

Diluted earnings

      1.04    1.01     0.95     0.96     0.95

Cash dividends

    $ 0.46    0.46     0.46     0.40     0.40

AVERAGE COMMON SHARES

                              

Basic

      1,564    1,571     1,487     1,296     1,300

Diluted

      1,591    1,603     1,518     1,316     1,320
    
  
 
 
 

 

PAGE 12

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

    

Six Months Ended

June 30,

(In millions, except per share data)

    2005
    2004

INTEREST INCOME

            

Interest and fees on loans

    $ 6,536    4,651

Interest and dividends on securities

      2,863    2,251

Trading account interest

      732    434

Other interest income

      1,024    682
    
  

Total interest income

      11,155    8,018
    
  

INTEREST EXPENSE

            

Interest on deposits

      2,271    1,302

Interest on short-term borrowings

      1,271    615

Interest on long-term debt

      842    402
    
  

Total interest expense

      4,384    2,319
    
  

Net interest income

      6,771    5,699

Provision for credit losses

      86    105
    
  

Net interest income after provision for credit losses

      6,685    5,594
    
  

FEE AND OTHER INCOME

            

Service charges

      1,041    960

Other banking fees

      706    570

Commissions

      1,202    1,413

Fiduciary and asset management fees

      1,442    1,404

Advisory, underwriting and other investment banking fees

      490    403

Trading account profits

      116    111

Principal investing

      100    53

Securities gains

      134    38

Other income

      741    422
    
  

Total fee and other income

      5,972    5,374
    
  

NONINTEREST EXPENSE

            

Salaries and employee benefits

      4,725    4,346

Occupancy

      521    453

Equipment

      534    512

Advertising

      92    96

Communications and supplies

      320    308

Professional and consulting fees

      282    235

Other intangible amortization

      222    219

Merger-related and restructuring expenses

      151    201

Sundry expense

      813    791
    
  

Total noninterest expense

      7,660    7,161
    
  

Minority interest in income of consolidated subsidiaries

      135    102
    
  

Income before income taxes

      4,862    3,705

Income taxes

      1,591    1,202
    
  

Net income

    $ 3,271    2,503
    
  

PER COMMON SHARE DATA

            

Basic earnings

    $ 2.09    1.92

Diluted earnings

      2.05    1.89

Cash dividends

    $ 0.92    0.80

AVERAGE COMMON SHARES

            

Basic

      1,567    1,301

Diluted

      1,597    1,323
    
  

 

PAGE 13

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

BUSINESS SEGMENTS

(Unaudited)

 

     Three Months Ended June 30, 2005

(In millions)

    General
Bank
    Capital
Management
     Wealth
Management
     Corporate
and
Investment
Bank
     Parent
     Net Merger-
Related and
Restructuring
Expenses (b)
     Total

CONSOLIDATED

                                          

Net interest income (a)

    $ 2,407    160     143     522     179     (53 )   3,358

Fee and other income

      686    1,189     185     789     128     —       2,977

Intersegment revenue

      49    (12 )   1     (39 )   1     —       —  
    
  
 
 
 
 
 

Total revenue (a)

      3,142    1,337     329     1,272     308     (53 )   6,335

Provision for credit losses

      68    —       —       (8 )   (10 )   —       50

Noninterest expense

      1,515    1,089     222     711     161     90     3,788

Minority interest

      —      —       —       —       85     (14 )   71

Income taxes (benefits)

      561    91     39     185     (72 )   (28 )   776

Tax-equivalent adjustment

      10    —       —       27     16     (53 )   —  
    
  
 
 
 
 
 

Net income

    $ 988    157     68     357     128     (48 )   1,650
    
  
 
 
 
 
 
     Three Months Ended March 31, 2005

(In millions)

    General
Bank
    Capital
Management
     Wealth
Management
     Corporate
and
Investment
Bank
     Parent
     Net Merger-
Related and
Restructuring
Expenses (b)
     Total

CONSOLIDATED

                                          

Net interest income (a)

    $ 2,359    159     140     590     226     (61 )   3,413

Fee and other income

      684    1,189     146     978     (2 )   —       2,995

Intersegment revenue

      43    (12 )   2     (34 )   1     —       —  
    
  
 
 
 
 
 

Total revenue (a)

      3,086    1,336     288     1,534     225     (61 )   6,408

Provision for credit losses

      57    —       (1 )   (3 )   (17 )   —       36

Noninterest expense

      1,544    1,093     191     732     251     61     3,872

Minority interest

      —      —       —       —       74     (10 )   64

Income taxes (benefits)

      536    89     36     271     (97 )   (20 )   815

Tax-equivalent adjustment

      10    —       —       28     23     (61 )   —  
    
  
 
 
 
 
 

Net income (loss)

    $ 939    154     62     506     (9 )   (31 )   1,621
    
  
 
 
 
 
 

 

PAGE 14

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

BUSINESS SEGMENTS

(Unaudited)

 

     Three Months Ended June 30, 2004

(In millions)

    General
Bank
    Capital
Management
     Wealth
Management
    Corporate
and
Investment
Bank
     Parent
     Net Merger-
Related and
Restructuring
Expenses (b)
     Total

CONSOLIDATED

                                         

Net interest income (a)

    $ 1,891    135     118    603     156     (65 )   2,838

Fee and other income

      601    1,236     153    713     (96 )   —       2,607

Intersegment revenue

      40    (11 )   1    (30 )   —       —       —  
    
  
 
  
 
 
 

Total revenue (a)

      2,532    1,360     272    1,286     60     (65 )   5,445

Provision for credit losses

      65    —       —      (4 )   —       —       61

Noninterest expense

      1,305    1,141     193    619     135     102     3,495

Minority interest

      —      —       —      —       70     (25 )   45

Income taxes (benefits)

      411    80     28    216     (113 )   (30 )   592

Tax-equivalent adjustment

      11    —       —      31     23     (65 )   —  
    
  
 
  
 
 
 

Net income (loss)

    $ 740    139     51    424     (55 )   (47 )   1,252
    
  
 
  
 
 
 
(a) Tax-equivalent.
(b) The tax-equivalent amounts are eliminated herein in order for “Total” amounts to agree with amounts appearing in the Consolidated Statements of Income.

 

PAGE 15

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

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

(Unaudited)

 

     2005
    2004

(In millions)

    Second
Quarter
    First
Quarter
    Fourth
Quarter
    Third
Quarter
    Second
Quarter

ON-BALANCE SHEET LOAN PORTFOLIO COMMERCIAL

                           

Commercial, financial and agricultural

    $ 80,528    78,669    75,095    59,271    58,340

Real estate—construction and other

      13,216    12,713    12,673    6,985    6,433

Real estate—mortgage

      19,724    20,707    20,742    14,771    14,927

Lease financing

      24,836    25,013    25,000    24,042    23,894

Foreign

      7,549    7,504    7,716    7,402    8,075
    
  
  
  
  

Total commercial

      145,853    144,606    141,226    112,471    111,669
    
  
  
  
  

CONSUMER

                           

Real estate secured

      76,213    74,631    74,161    54,965    53,759

Student loans

      10,828    10,795    10,468    10,207    9,838

Installment loans

      6,783    6,808    7,684    6,410    7,330
    
  
  
  
  

Total consumer

      93,824    92,234    92,313    71,582    70,927
    
  
  
  
  

Total loans

      239,677    236,840    233,539    184,053    182,596

Unearned income

      9,390    9,574    9,699    9,549    9,679
    
  
  
  
  

Loans, net (On-balance sheet)

    $ 230,287    227,266    223,840    174,504    172,917
    
  
  
  
  

MANAGED PORTFOLIO (a)

                           

COMMERCIAL

                           

On-balance sheet loan portfolio

    $ 145,853    144,606    141,226    112,471    111,669

Securitized loans—off-balance sheet

      1,293    1,402    1,734    1,823    1,868

Loans held for sale

      1,783    1,117    2,112    1,993    1,887
    
  
  
  
  

Total commercial

      148,929    147,125    145,072    116,287    115,424
    
  
  
  
  

CONSUMER

                           

Real estate secured

                           

On-balance sheet loan portfolio

      76,213    74,631    74,161    54,965    53,759

Securitized loans—off-balance sheet

      10,199    6,979    7,570    6,567    7,194

Securitized loans included in securities

      4,426    4,626    4,838    8,909    9,506

Loans held for sale

      11,923    11,925    10,452    15,602    14,003
    
  
  
  
  

Total real estate secured

      102,761    98,161    97,021    86,043    84,462
    
  
  
  
  

Student

                           

On-balance sheet loan portfolio

      10,828    10,795    10,468    10,207    9,838

Securitized loans—off-balance sheet

      382    423    463    554    612

Loans held for sale

      16    65    128    160    367
    
  
  
  
  

Total student

      11,226    11,283    11,059    10,921    10,817
    
  
  
  
  

Installment

                           

On-balance sheet loan portfolio

      6,783    6,808    7,684    6,410    7,330

Securitized loans—off-balance sheet

      2,662    1,930    2,184    2,489    1,794

Securitized loans included in securities

      163    155    195    195    130

Loans held for sale

      809    1,066    296    —      —  
    
  
  
  
  

Total installment

      10,417    9,959    10,359    9,094    9,254
    
  
  
  
  

Total consumer

      124,404    119,403    118,439    106,058    104,533
    
  
  
  
  

Total managed portfolio

    $ 273,333    266,528    263,511    222,345    219,957
    
  
  
  
  

SERVICING PORTFOLIO (b)

                           

Commercial

    $ 152,923    140,493    136,578    130,313    108,207

Consumer

    $ 53,261    46,552    40,053    31,549    24,475
    
  
  
  
  
(a) The managed portfolio includes the on-balance sheet loan portfolio, loans securitized for which the assets are classified in securities on-balance sheet, loans held for sale on-balance sheet and the off-balance sheet portfolio of securitized loans sold, where we service the loans.
(b) The servicing portfolio consists of third party commercial and consumer loans for which our sole function is that of servicing the loans for the third parties.

 

PAGE 16

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS

(Unaudited)

 

     2005
     2004
  

(In millions)

    Second
Quarter
     First
Quarter
     Fourth
Quarter
     Third
Quarter
     Second
Quarter
  

ALLOWANCE FOR LOAN LOSSES (a)

                                 

Balance, beginning of period

    $ 2,732     2,757     2,324     2,331     2,338  

Provision for credit losses

      48     33     95     63     73  

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

      —       1     (6 )   (8 )   (9 )

Balance of acquired entities at purchase date

      —       —       510     —       —    

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

      (11 )   (13 )   (51 )   3     (3 )

Net charge-offs

      (51 )   (46 )   (115 )   (65 )   (68 )
    
 
 
 
 

Balance, end of period

    $ 2,718     2,732     2,757     2,324     2,331  
    
 
 
 
 

as % of loans, net

      1.18 %   1.20     1.23     1.33     1.35  
    
 
 
 
 

as % of nonaccrual and restructured loans (b)

      332 %   300     289     291     270  
    
 
 
 
 

as % of nonperforming assets (b)

      284 %   262     251     258     241  
    
 
 
 
 

LOAN LOSSES

                                 

Commercial, financial and agricultural

    $ 35     26     82     50     41  

Commercial real estate—construction and mortgage

      —       1     4     3     1  

Consumer

      75     67     74     70     66  
    
 
 
 
 

Total loan losses

      110     94     160     123     108  
    
 
 
 
 

LOAN RECOVERIES

                                 

Commercial, financial and agricultural

      25     26     27     41     23  

Commercial real estate—construction and mortgage

      1     —       —       1     —    

Consumer

      33     22     18     16     17  
    
 
 
 
 

Total loan recoveries

      59     48     45     58     40  
    
 
 
 
 

Net charge-offs

    $ 51     46     115     65     68  
    
 
 
 
 

Commercial loans net charge-offs as % of average commercial loans, net (c)

      0.03 %   —       0.20     0.05     0.08  

Consumer loans net charge-offs as % of average consumer loans, net (c)

      0.18     0.19     0.28     0.30     0.28  

Total net charge-offs as % of average loans, net (c)

      0.09 %   0.08     0.23     0.15     0.17  
    
 
 
 
 

NONPERFORMING ASSETS

                                 

Nonaccrual loans

                                 

Commercial, financial and agricultural

    $ 497     527     585     534     610  

Commercial real estate—construction and mortgage

      88     131     127     42     33  

Consumer real estate secured

      221     239     230     211     207  

Installment loans

      13     13     13     11     13  
    
 
 
 
 

Total nonaccrual loans

      819     910     955     798     863  

Foreclosed properties (d)

      138     132     145     101     104  
    
 
 
 
 

Total nonperforming assets

    $ 957     1,042     1,100     899     967  
    
 
 
 
 

Nonperforming loans included in loans held for sale (e)

    $ 111     159     157     57     68  

Nonperforming assets included in loans and in loans held for sale

    $ 1,068     1,201     1,257     956     1,035  
    
 
 
 
 

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

      0.42 %   0.46     0.49     0.51     0.56  
    
 
 
 
 

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

      0.44 %   0.50     0.53     0.50     0.55  
    
 
 
 
 

Accruing loans past due 90 days

    $ 521     510     522     428     419  
    
 
 
 
 
(a) At June 30, 2005, the reserve for unfunded lending commitments was $158 million.
(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.

 

PAGE 17

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     2005
     2004
  

(In millions, except per share data)

    Second
Quarter
     First
Quarter
     Fourth
Quarter
     Third
Quarter
     Second
Quarter
  

ASSETS

                                 

Cash and due from banks

    $ 12,464     12,043     11,714     10,355     10,701  

Interest-bearing bank balances

      2,852     1,285     4,441     7,664     2,059  

Federal funds sold and securities purchased under resale agreements

      22,528     24,899     22,436     30,629     21,970  
    
 
 
 
 

Total cash and cash equivalents

      37,844     38,227     38,591     48,648     34,730  
    
 
 
 
 

Trading account assets

      46,519     47,149     45,932     45,129     39,659  

Securities

      117,906     116,731     110,597     102,157     102,934  

Loans, net of unearned income

      230,287     227,266     223,840     174,504     172,917  

Allowance for loan losses

      (2,718 )   (2,732 )   (2,757 )   (2,324 )   (2,331 )
    
 
 
 
 

Loans, net

      227,569     224,534     221,083     172,180     170,586  
    
 
 
 
 

Loans held for sale

      14,531     14,173     12,988     17,755     16,257  

Premises and equipment

      5,354     5,260     5,268     4,150     4,522  

Due from customers on acceptances

      826     826     718     563     703  

Goodwill

      21,861     21,635     21,526     11,481     11,481  

Other intangible assets

      1,378     1,428     1,581     946     1,045  

Other assets

      38,052     36,870     35,040     33,689     36,524  
    
 
 
 
 

Total assets

    $ 511,840     506,833     493,324     436,698     418,441  
    
 
 
 
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                 

Deposits

                                 

Noninterest-bearing deposits

      63,079     61,626     64,197     52,524     51,613  

Interest-bearing deposits

      236,831     236,031     230,856     200,457     191,767  
    
 
 
 
 

Total deposits

      299,910     297,657     295,053     252,981     243,380  

Short-term borrowings

      75,726     73,401     63,406     67,589     66,360  

Bank acceptances outstanding

      859     866     755     570     708  

Trading account liabilities

      19,827     22,418     21,709     22,704     20,327  

Other liabilities

      15,750     15,281     15,507     14,838     15,321  

Long-term debt

      49,006     47,932     46,759     41,444     37,022  
    
 
 
 
 

Total liabilities

      461,078     457,555     443,189     400,126     383,118  
    
 
 
 
 

Minority interest in net assets of consolidated subsidiaries

      2,858     2,811     2,818     2,675     2,677  
    
 
 
 
 

STOCKHOLDERS’ EQUITY

                                 

Dividend Equalization Preferred shares, no par value, 97 million shares issued and outstanding at June 30, 2005

      —       —       —       —       —    

Common stock, $3.33 1/3 par value; authorized 3 billion shares, outstanding 1.577 billion shares at June 30, 2005

      5,258     5,255     5,294     4,359     4,365  

Paid-in capital

      31,038     30,976     31,120     18,095     17,920  

Retained earnings

      11,079     10,319     10,178     10,449     9,890  

Accumulated other comprehensive income, net

      529     (83 )   725     994     471  
    
 
 
 
 

Total stockholders’ equity

      47,904     46,467     47,317     33,897     32,646  
    
 
 
 
 

Total liabilities and stockholders’ equity

    $ 511,840     506,833     493,324     436,698     418,441  
    
 
 
 
 

PAGE 18

 

WACHOVIA CORPORATION AND SUBSIDIARIES

NET INTEREST INCOME SUMMARIES

(Unaudited)

 

     SECOND QUARTER 2005
     FIRST QUARTER 2005
  

(In millions)

   

Average

Balances

   

Interest

Income/

Expense

   

Average

Rates

Earned/

Paid

    

Average

Balances

   

Interest

Income/

Expense

   

Average

Rates

Earned/

Paid

  

ASSETS

                                         

Interest-bearing bank balances

    $ 2,649      20    3.07 %   $ 2,484      16    2.62 %

Federal funds sold and securities purchased under resale agreements

      24,676      189    3.08       24,272      153    2.55  

Trading account assets

      31,879      377    4.73       35,147      402    4.59  

Securities

      115,006      1,469    5.11       114,961      1,477    5.15  

Loans

                                         

Commercial

                                         

Commercial, financial and agricultural

      80,213      1,084    5.42       76,651      960    5.08  

Real estate—construction and other

      12,885      177    5.53       12,608      156    5.01  

Real estate—mortgage

      20,204      288    5.71       20,739      271    5.31  

Lease financing

      10,252      183    7.11       10,513      182    6.94  

Foreign

      7,641      68    3.55       7,192      58    3.28  
    
  
        
  
      

Total commercial

      131,195      1,800    5.50       127,703      1,627    5.16  
    
  
        
  
      

Consumer

                                         

Real estate secured

      74,799      1,072    5.74       74,658      1,037    5.57  

Student loans

      10,995      129    4.72       11,003      120    4.41  

Installment loans

      6,892      115    6.75       7,811      122    6.31  
    
  
        
  
      

Total consumer

      92,686      1,316    5.69       93,472      1,279    5.49  
    
  
        
  
      

Total loans

      223,881      3,116    5.58       221,175      2,906    5.30  
    
  
        
  
      

Loans held for sale

      14,024      194    5.51       12,869      166    5.19  

Other earning assets

      10,419      125    4.84       10,139      115    4.58  
    
  
        
  
      

Total earning assets excluding derivatives

      422,534      5,490    5.20       421,047      5,235    5.00  

Risk management derivatives (a)

      —        265    0.26       —        279    0.27  
    
  
        
  
      

Total earning assets including derivatives

      422,534      5,755    5.46       421,047      5,514    5.27  
           
  
        
  

Cash and due from banks

      12,389                   12,661              

Other assets

      68,438                   66,778              
    
               
             

Total assets

    $ 503,361                 $ 500,486              
    
               
             

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                         

Interest-bearing deposits

                                         

Savings and NOW accounts

      80,113      194    0.97       81,071      161    0.81  

Money market accounts

      94,990      455    1.92       93,477      357    1.55  

Other consumer time

      38,064      273    2.87       36,005      239    2.70  

Foreign

      11,857      81    2.75       10,996      61    2.26  

Other time

      9,999      78    3.09       12,583      83    2.67  
    
  
        
  
      

Total interest-bearing deposits

      235,023      1,081    1.84       234,132      901    1.56  

Federal funds purchased and securities sold under repurchase agreements

      53,984      375    2.79       51,395      312    2.46  

Commercial paper

      13,365      97    2.91       13,553      82    2.45  

Securities sold short

      10,648      92    3.49       12,681      102    3.25  

Other short-term borrowings

      6,694      30    1.82       6,370      26    1.63  

Long-term debt

      48,114      528    4.39       47,385      493    4.17  
    
  
        
  
      

Total interest-bearing liabilities excluding derivatives

      367,828      2,203    2.40       365,516      1,916    2.12  

Risk management derivatives (a)

      —        141    0.16       —        124    0.14  
    
  
        
  
      

Total interest-bearing liabilities including derivatives

      367,828      2,344    2.56       365,516      2,040    2.26  
           
  
        
  

Noninterest-bearing deposits

      62,171                   60,542              

Other liabilities

      26,248                   27,197              

Stockholders' equity

      47,114                   47,231              
    
               
             

Total liabilities and stockholders’ equity

    $ 503,361                 $ 500,486              
    
               
             

Interest income and rate earned—including derivatives

           $ 5,755    5.46 %          $ 5,514    5.27 %

Interest expense and equivalent rate paid—including derivatives

             2,344    2.23              2,040    1.96  
           
  
        
  

Net interest income and margin—including derivatives

           $ 3,411    3.23 %          $ 3,474    3.31 %
           
  
        
  
(a) The rates earned and the rates paid on risk management derivatives are based on off-balance sheet notional amounts. The fair value of these instruments is included in other assets and other liabilities.

PAGE 19

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

NET INTEREST INCOME SUMMARIES

(Unaudited)

 

FOURTH QUARTER 2004
     THIRD QUARTER 2004
     SECOND QUARTER 2004
  
Average
Balances
   Interest
Income/
Expense
   Average
Rates
Earned/
Paid
     Average
Balances
   Interest
Income/
Expense
   Average
Rates
Earned/
Paid
     Average
Balances
   Interest
Income/
Expense
   Average
Rates
Earned/
Paid
  
                                                   
$ 3,909     18   1.85 %   $ 3,153     12   1.52 %   $ 4,015     11   1.13 %
  24,722     123   1.99       26,419     96   1.44       23,800     62   1.05  
  36,517     411   4.49       32,052     348   4.34       26,135     260   3.98  
  103,879     1,297   5.00       101,493     1,237   4.88       100,209     1,196   4.77  
                                                   
                                                   
  69,394     836   4.79       58,278     642   4.40       56,648     599   4.25  
  10,537     120   4.53       6,683     67   4.02       6,309     56   3.56  
  19,035     237   4.95       14,877     170   4.54       15,029     158   4.21  
  10,185     180   7.07       9,692     178   7.33       7,011     180   10.28  
  7,448     58   3.10       7,330     47   2.51       7,110     41   2.32  
 
       
 
       
 
     
  116,599     1,431   4.88       96,860     1,104   4.54       92,107     1,034   4.51  
 
       
 
       
 
     
                                                   
  62,083     853   5.49       54,288     732   5.38       52,389     691   5.29  
  10,560     107   4.04       10,145     97   3.80       9,941     90   3.63  
  7,285     111   6.12       7,259     107   5.86       9,205     126   5.48  
 
       
 
       
 
     
  79,928     1,071   5.35       71,692     936   5.21       71,535     907   5.08  
 
       
 
       
 
     
  196,527     2,502   5.08       168,552     2,040   4.83       163,642     1,941   4.76  
 
       
 
       
 
     
  21,405     261   4.89       17,119     186   4.34       15,603     161   4.12  
  10,531     104   3.89       11,121     96   3.43       11,443     82   2.91  
 
       
 
       
 
     
  397,490     4,716   4.74       359,909     4,015   4.45       344,847     3,713   4.32  
  —       313   0.31       —       349   0.39       —       371   0.43  
 
       
 
       
 
     
  397,490     5,029   5.05       359,909     4,364   4.84       344,847     4,084   4.75  
     
 
       
 
       
 
  11,870                 11,159                 11,254            
  63,071                 53,331                 54,973            
             
             
           
$ 472,431               $ 424,399               $ 411,074            
             
             
           
                                                   
                                                   
  79,476     128   0.64       73,171     93   0.51       70,205     78   0.45  
  90,382     271   1.19       81,525     197   0.96       76,850     172   0.90  
  32,540     212   2.58       26,860     180   2.68       26,288     176   2.69  
  9,486     46   1.92       7,453     27   1.42       7,110     20   1.14  
  9,938     56   2.31       7,803     39   1.98       7,773     34   1.76  
 
       
 
       
 
     
  221,822     713   1.28       196,812     536   1.08       188,226     480   1.03  
  47,264     233   1.96       47,052     164   1.39       46,620     116   1.00  
  11,840     58   1.94       12,065     43   1.42       12,382     32   1.04  
  12,694     102   3.18       12,388     96   3.09       10,571     73   2.78  
  5,859     19   1.33       6,042     15   0.91       6,013     11   0.80  
  44,010     443   4.02       39,951     404   4.05       37,840     378   3.99  
 
       
 
       
 
     
  343,489     1,568   1.82       314,310     1,258   1.60       301,652     1,090   1.45  
  —       104   0.12       —       78   0.09       —       91   0.12  
 
       
 
       
 
     
  343,489     1,672   1.94       314,310     1,336   1.69       301,652     1,181   1.57  
     
 
       
 
       
 
  58,229                 51,433                 50,466            
  28,069                 25,410                 26,460            
  42,644                 33,246                 32,496            
             
             
           
$ 472,431               $ 424,399               $ 411,074            
             
             
           
      $ 5,029   5.05 %         $ 4,364   4.84 %         $ 4,084   4.75 %
        1,672   1.68             1,336   1.48             1,181   1.38  
     
 
       
 
       
 
      $ 3,357   3.37 %         $ 3,028   3.36 %         $ 2,903   3.37 %
     
 
       
 
       
 

 

PAGE 20

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

NET INTEREST INCOME SUMMARIES

(Unaudited)

 

     SIX MONTHS ENDED 2005
     SIX MONTHS ENDED 2004
  

(In millions)

    Average
Balances
    Interest
Income/
Expense
    Average
Rates
Earned/
Paid
     Average
Balances
    Interest
Income/
Expense
    Average
Rates
Earned/
Paid
  

ASSETS

                                         

Interest-bearing bank balances

    $ 2,567      36    2.85 %   $ 3,626      21    1.15 %

Federal funds sold and securities purchased under resale agreements

      24,475      342    2.82       24,303      123    1.02  

Trading account assets

      33,504      779    4.66       23,546      480    4.08  

Securities

      114,983      2,946    5.13       99,216      2,417    4.87  

Loans

                                         

Commercial

                                         

Commercial, financial and agricultural

      78,442      2,044    5.25       56,062      1,175    4.21  

Real estate—construction and other

      12,747      333    5.28       6,166      109    3.54  

Real estate—mortgage

      20,470      559    5.51       15,135      318    4.22  

Lease financing

      10,382      365    7.02       6,978      363    10.40  

Foreign

      7,418      126    3.42       6,897      82    2.40  
    
  
        
  
      

Total commercial

      129,459      3,427    5.33       91,238      2,047    4.51  
    
  
        
  
      

Consumer

                                         

Real estate secured

      74,729      2,109    5.65       51,634      1,396    5.42  

Student loans

      10,999      249    4.56       9,425      168    3.58  

Installment loans

      7,349      237    6.52       9,115      256    5.64  
    
  
        
  
      

Total consumer

      93,077      2,595    5.59       70,174      1,820    5.20  
    
  
        
  
      

Total loans

      222,536      6,022    5.44       161,412      3,867    4.81  
    
  
        
  
      

Loans held for sale

      13,450      360    5.35       14,181      292    4.12  

Other earning assets

      10,279      240    4.71       11,299      166    2.96  
    
  
        
  
      

Total earning assets excluding derivatives

      421,794      10,725    5.11       337,583      7,366    4.37  

Risk management derivatives (a)

      —        544    0.26       —        779    0.47  
    
  
        
  
      

Total earning assets including derivatives

      421,794      11,269    5.37       337,583      8,145    4.84  
           
  
        
  

Cash and due from banks

      12,524                   11,105              

Other assets

      67,613                   56,193              
    
               
             

Total assets

    $ 501,931                 $ 404,881              
    
               
             

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                         

Interest-bearing deposits

                                         

Savings and NOW accounts

      80,589      355    0.89       67,786      148    0.44  

Money market accounts

      94,238      812    1.74       73,029      326    0.90  

Other consumer time

      37,040      512    2.79       26,891      365    2.73  

Foreign

      11,429      142    2.51       7,392      42    1.16  

Other time

      11,284      161    2.86       7,724      68    1.76  
    
  
        
  
      

Total interest-bearing deposits

      234,580      1,982    1.70       182,822      949    1.04  

Federal funds purchased and securities sold under repurchase agreements

      52,697      687    2.63       47,486      240    1.02  

Commercial paper

      13,458      179    2.68       12,117      62    1.03  

Securities sold short

      11,659      194    3.36       9,491      120    2.54  

Other short-term borrowings

      6,532      56    1.73       6,225      21    0.69  

Long-term debt

      47,752      1,021    4.28       37,555      742    3.95  
    
  
        
  
      

Total interest-bearing liabilities excluding derivatives

      366,678      4,119    2.26       295,696      2,134    1.45  

Risk management derivatives (a)

      —        265    0.15       —        185    0.13  
    
  
        
  
      

Total interest-bearing liabilities including derivatives

      366,678      4,384    2.41       295,696      2,319    1.58  
           
  
        
  

Noninterest-bearing deposits

      61,361                   48,535              

Other liabilities

      26,720                   28,034              

Stockholders' equity

      47,172                   32,616              
    
               
             

Total liabilities and stockholders’ equity

    $ 501,931                 $ 404,881              
    
               
             

Interest income and rate earned—including derivatives

           $ 11,269    5.37 %          $ 8,145    4.84 %

Interest expense and equivalent rate paid—including derivatives

             4,384    2.10              2,319    1.38  
           
  
        
  

Net interest income and margin—including derivatives

           $ 6,885    3.27 %          $ 5,826    3.46 %
           
  
        
  
(a) The rates earned and the rates paid on risk management derivatives are based on off-balance sheet notional amounts. The fair value of these instruments is included in other assets and other liabilities.

PAGE 21

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES

(Unaudited)

 

          2005
     2004
  

(In millions, except per share data)

   

*

    Second
Quarter
     First
Quarter
     Fourth
Quarter
     Third
Quarter
     Second
Quarter
  

NET INCOME

                                      

Net income (GAAP)

    A    $ 1,650     1,621     1,448     1,263     1,252  

After tax merger-related and restructuring expenses (GAAP)

           48     31     53     55     47  
    
  
 
 
 
 

Net income, excluding after tax merger-related and restructuring expenses

    B      1,698     1,652     1,501     1,318     1,299  

After tax other intangible amortization (GAAP)

           69     72     74     62     67  
    
  
 
 
 
 

Net income, excluding after tax merger-related and restructuring expenses, and other intangible amortization

    C    $ 1,767     1,724     1,575     1,380     1,366  
    
  
 
 
 
 

RETURN ON AVERAGE COMMON STOCKHOLDERS’ EQUITY

                                      

Average common stockholders’ equity (GAAP)

    D    $ 47,114     47,231     42,644     33,246     32,496  

Merger-related and restructuring expenses (GAAP)

           52     11     169     116     69  
    
  
 
 
 
 

Average common stockholders’ equity, excluding merger-related and restructuring expenses

    E      47,166     47,242     42,813     33,362     32,565  

Average intangible assets (GAAP)

    F      (23,148 )   (23,020 )   (19,257 )   (12,473 )   (12,326 )
    
  
 
 
 
 

Average common stockholders’ equity, excluding merger-related and restructuring expenses, and other intangible amortization

    G    $ 24,018     24,222     23,556     20,889     20,239  
    
  
 
 
 
 

Return on average common stockholders’ equity

                                     

GAAP

    A/D      14.04 %   13.92     13.50     15.12     15.49  

Excluding merger-related and restructuring expenses

    B/E      14.43     14.19     13.95     15.72     16.04  

Return on average tangible common stockholders’ equity

                                      

GAAP

    A/D+F      27.61     27.16     24.62     24.20     24.96  

Excluding merger-related and restructuring expenses, and other intangible amortization

    C/G      29.50 %   28.86     26.59     26.28     27.15  
    
  
 
 
 
 

RETURN ON AVERAGE ASSETS

                                      

Average assets (GAAP)

    H    $ 503,361     500,486     472,431     424,399     411,074  

Average intangible assets (GAAP)

           (23,148 )   (23,020 )   (19,257 )   (12,473 )   (12,326 )
    
  
 
 
 
 

Average tangible assets (GAAP)

    I      480,213     477,466     453,174     411,926     398,748  
    
  
 
 
 
 

Average assets (GAAP)

           503,361     500,486     472,431     424,399     411,074  

Merger-related and restructuring expenses (GAAP)

           52     11     169     116     69  
    
  
 
 
 
 

Average assets, excluding merger-related and restructuring expenses

    J      503,413     500,497     472,600     424,515     411,143  

Average intangible assets (GAAP)

           (23,148 )   (23,020 )   (19,257 )   (12,473 )   (12,326 )
    
  
 
 
 
 

Average tangible assets, excluding merger-related and restructuring expenses

    K    $ 480,265     477,477     453,343     412,042     398,817  
    
  
 
 
 
 

Return on average assets

                                      

GAAP

    A/H      1.31 %   1.31     1.22     1.18     1.22  

Excluding merger-related and restructuring expenses

    B/J      1.35     1.34     1.26     1.24     1.27  

Return on average tangible assets

                                      

GAAP

    A/I      1.38     1.38     1.27     1.22     1.26  

Excluding merger-related and restructuring expenses, and other intangible amortization

    C/K      1.48 %   1.46     1.38     1.33     1.38  
    
  
 
 
 
 

 

PAGE 22

 

WACHOVIA CORPORATION AND SUBSIDIARIES

 

RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES

(Unaudited)

 

          2005
     2004
  

(In millions, except per share data)

   

*

    Second
Quarter
     First
Quarter
     Fourth
Quarter
     Third
Quarter
     Second
Quarter
  

OVERHEAD EFFICIENCY RATIOS

                                      

Noninterest expense (GAAP)

    L    $ 3,788     3,872     3,834     3,671     3,495  

Merger-related and restructuring expenses (GAAP)

           (90 )   (61 )   (116 )   (127 )   (102 )
    
  
 
 
 
 

Noninterest expense, excluding merger-related and restructuring expenses

    M      3,698     3,811     3,718     3,544     3,393  

Other intangible amortization (GAAP)

           (107 )   (115 )   (113 )   (99 )   (107 )
    
  
 
 
 
 

Noninterest expense, excluding merger-related and restructuring expenses, and other intangible amortization

    N    $ 3,591     3,696     3,605     3,445     3,286  
    
  
 
 
 
 

Net interest income (GAAP)

         $ 3,358     3,413     3,297     2,965     2,838  

Tax-equivalent adjustment

           53     61     60     63     65  
    
  
 
 
 
 

Net interest income (Tax-equivalent)

           3,411     3,474     3,357     3,028     2,903  

Fee and other income (GAAP)

           2,977     2,995     2,804     2,601     2,607  
    
  
 
 
 
 

Total

    O    $ 6,388     6,469     6,161     5,629     5,510  
    
  
 
 
 
 

Retail Brokerage Services, excluding insurance

                                      

Noninterest expense (GAAP)

    P    $ 862     867     908     863     907  
    
  
 
 
 
 

Net interest income (GAAP)

         $ 144     145     147     144     121  

Tax-equivalent adjustment

           —       —       1     —       —    
    
  
 
 
 
 

Net interest income (Tax-equivalent)

           144     145     148     144     121  

Fee and other income (GAAP)

           881     886     906     826     907  
    
  
 
 
 
 

Total

    Q    $ 1,025     1,031     1,054     970     1,028  
    
  
 
 
 
 

Overhead efficiency ratios

                                      

GAAP

    L/O      59.29 %   59.86     62.23     65.20     63.46  

Excluding merger-related and restructuring expenses

    M/O      57.87     58.92     60.34     62.96     61.60  

Excluding merger-related and restructuring expenses, and brokerage

    M-P/O-Q      52.87     54.14     55.01     57.56     55.50  

Excluding merger-related and restructuring expenses, and other intangible amortization

    N/O      56.19     57.15     58.50     61.20     59.66  

Excluding merger-related and restructuring expenses, other intangible amortization and brokerage

    N-P/O-Q      50.86 %   52.03     52.78     55.43     53.12  
    
  
 
 
 
 

OPERATING LEVERAGE

                                      

Operating leverage (GAAP)

         $ 5     269     368     (55 )   (11 )

Merger-related and restructuring expenses (GAAP)

           30     (55 )   (10 )   25     3  
    
  
 
 
 
 

Operating leverage, excluding merger-related and restructuring expenses

           35     214     358     (30 )   (8 )

Other intangible amortization (GAAP)

           (8 )   1     15     (8 )   (5 )
    
  
 
 
 
 

Operating leverage, excluding merger-related and restructuring expenses, and other intangible amortization

         $ 27     215     373     (38 )   (13 )
    
  
 
 
 
 

DIVIDEND PAYOUT RATIOS ON COMMON SHARES

                                      

Dividends paid per common share

    R    $ 0.46     0.46     0.46     0.40     0.40  
    
  
 
 
 
 

Diluted earnings per common share (GAAP)

    S    $ 1.04     1.01     0.95     0.96     0.95  

Merger-related and restructuring expenses (GAAP)

           0.03     0.02     0.04     0.04     0.03  

Other intangible amortization (GAAP)

           0.04     0.05     0.05     0.05     0.05  
    
  
 
 
 
 

Diluted earnings per common share, excluding merger-related and restructuring expenses, and other intangible amortization

    T    $ 1.11     1.08     1.04     1.05     1.03  
    
  
 
 
 
 

Dividend payout ratios

                                      

GAAP

    R/S      44.23 %   45.54     48.42     41.67     42.11  

Excluding merger-related and restructuring expenses, and other intangible amortization

    R/T      41.44 %   42.59     44.23     38.10     38.83  
    
  
 
 
 
 
* The letters included in the columns are provided to show how the various ratios presented in the tables on pages 21 and 22 are calculated. For example, return on average assets on a GAAP basis is calculated by dividing income (GAAP) by average assets (GAAP) (i.e., A/H) and annualized where appropriate.