EX-99.(C) 5 dex99c.txt THE EARNINGS REVIEW PRESENTATION Exhibit 99(c) [WACHOVIA LOGO] 4th Quarter 2001 Supplemental Earnings Package Highlights and Earnings Review January 23, 2002 ALL INFORMATION EXCLUDES MERGER-RELATED, RESTRUCTURING AND OTHER CHARGES/GAINS AND IS BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE EXCEPT WHERE SPECIFICALLY NOTED. Certain tables and narrative comparisons in this Supplemental Earnings Package refer to "Combined" results for the third quarter of 2001. "Combined" results for the third quarter of 2001 represent Wachovia's actual 2001 third quarter results plus the actual results of Former Wachovia for July and August 2001. The "Combined" results are for illustrative purposes only and presentation of 3Q01 results on this "Combined" basis is not a presentation that conforms with generally accepted accounting principles. The 3Q01 "Combined" results include purchase accounting and other closing adjustments as of the actual closing date of 9/1/01; no attempt was made to show the "Combined" results "as if" the merger had occurred at 7/1/01. Readers are encouraged to refer to Wachovia's results presented in accordance with generally accepted accounting principles which may be found in Exhibit 99(a) to Wachovia's Form 8-K, filed on January 23, 2002. Tabular Financial information presented herein, unless specifically labeled "Combined," represents operating earnings information. All narrative comparisons are with "Combined" third quarter 2001 unless otherwise noted. Fourth Quarter 2001 [WACHOVIA LOGO] Financial Highlights ------------------------------------------------------------------------------- Versus 3Q 2001 "Combined" (Includes, for comparison purposes, WB results ------------------------- for 2 months ended 8/31/01 without giving effect to purchase accounting adjustments which occurred at close-see cover page) o Cash operating earnings of $0.71 per share, vs. $0.70 cash consensus o Core revenue grew 8%; increased in all four businesses - General Bank again had an outstanding quarter with 6% revenue growth from strong consumer loan, mortgage, deposit and investment sales - Capital Management rebounded nicely with 9% revenue growth o Continued strong expense control evident and FTEs declined by 1,488 o Total NPAs grew only 2% from actual 3Q01 o Tier 1 capital ratio increased 28 bps to 7.03% o Merger integration progressing well 1
Fourth Quarter 2001 [WACHOVIA LOGO] Earnings Review ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Earnings Summary 2001 ------------------ Fourth (After-tax in millions, except per share data) Quarter EPS ------------------------------------------------------------------------------- Cash operating earnings $ 980 0.71 Deposit base and other intangible amortization (121) (0.09) Goodwill amortization (60) (0.04) ------------------------------------------------------------------------------- Operating earnings 799 0.58 Total merger-related and restructuring charges (63) (0.04) ------------------------------------------------------------------------------- Net earnings (GAAP) $ 736 0.54 -------------------------------------------------------------------------------
Key Points o GAAP results include $0.04 per share of goodwill amortization which ceased as of January 1, 2002 o Estimated quarterly 2002 after-tax deposit base and other intangibles amortization totals $405 million; Q1: $111 million, Q2: $101 million, Q3: $97 million, Q4: $96 million 2
Summary Operating Results [WACHOVIA LOGO] ------------------------------------------------------------------------------------------------------------------------------------ ----------------------------------------------------------------- In accordance with purchase accounting, results are not restated ----------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------ Operating Earnings Summary 2001 2000 Combined -------------------------------------- ------ 4 Q 01 ------------------ Fourth Third Second First Fourth vs Third 4 Q 01 vs (In millions, except per share data) Quarter Quarter Quarter Quarter Quarter 3 Q 01 Quarter 3 Q 01 ------------------------------------------------------------------------------------------------------------------------------------ Net interest income(Tax-equivalent) $ 2,484 1,974 1,742 1,734 1,757 26 % $ 2,347 6 % Fee and other income 2,060 1,036 1,629 1,546 1,582 99 1,294 59 ------------------------------------------------------------------------------------------------------------------------------------ Total revenue (Tax-equivalent) 4,544 3,010 3,371 3,280 3,339 51 3,641 25 Provision for loan losses 381 244 223 219 192 56 Noninterest expense, excluding goodwill and other intangible amortization 2,691 2,193 2,092 2,060 2,052 23 $ 2,657 1 % Goodwill and other intangible amortization 251 117 77 78 80 - ------------------------------------------------------------------------------------------------------------------------------------ Income before income taxes (Tax-equivalent) 1,221 456 979 923 1,015 - Income taxes (Tax-equivalent) 422 158 330 313 334 - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 799 298 649 610 681 - % Net income (Cash basis) $ 980 395 723 684 753 - % ------------------------------------------------------------------------------------------------------------------------------------ Diluted earnings per common share $ 0.58 0.27 0.66 0.62 0.69 - % Diluted earnings per common share (Cash basis) $ 0.71 0.36 0.73 0.69 0.76 97 % Return on average common stockholders' equity 10.77 % 5.77 16.19 15.64 15.36 - Return on average tangible common stockholders' equity (Cash basis) 23.56 % 11.36 23.35 22.91 21.55 - ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Revenues up 25% over Combined 3Q01 driven by strength in NII and fee income; up 8% excluding principal investing o Provision expense reflects $97 million charge-off relating to a large energy services credit o Cash expenses up only 1% over Combined 3Q01 levels reflecting a continued focus on cost control 3
Key Financial Measures [WACHOVIA LOGO] ---------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------- Operating Basis Performance Highlights 2001 2000 4 Q 01 ----------------------------------------------- -------- Fourth Third Second First Fourth vs (In millions, except per share data) Quarter Quarter Quarter Quarter Quarter 3 Q 01 ---------------------------------------------------------------------------------------------------------------------------------- Cash operating earnings Net income $ 980 395 723 684 753 - % Diluted earnings per common share $ 0.71 0.36 0.73 0.69 0.76 97 Dividend payout ratio on common shares 33.80 % 66.67 32.88 34.78 63.16 - Return on average tangible assets 1.27 % 0.60 1.19 1.15 1.26 - Return on average tangible common stockholders' equity 23.56 % 11.36 23.35 22.91 21.55 - Overhead efficiency ratio 59.22 % 72.86 62.06 62.80 61.46 - Operating leverage $ 1,036 (462) 59 (67) 31 - % ---------------------------------------------------------------------------------------------------------------------------------- Other financial data Net interest margin 3.81 % 3.58 3.41 3.42 3.46 - Average diluted common shares 1,363 1,105 978 976 990 23 % Actual common shares 1,362 1,361 979 981 980 - Dividends paid per common share $ 0.24 0.24 0.24 0.24 0.48 - Book value per common share $ 20.88 20.94 16.49 16.39 15.66 - % Tier 1 capital ratio /(a)/ 7.03 % 6.75 7.37 7.18 7.02 - Total capital ratio /(a)/ 11.05 10.84 11.45 11.33 11.19 - Leverage ratio /(a)/ 6.19 % 7.22 6.00 5.88 5.92 - ---------------------------------------------------------------------------------------------------------------------------------- Other FTE employees 84,046 85,534 67,420 69,362 70,639 (2)% Total financial centers 2,846 2,853 2,162 2,164 2,193 - Total ATMs 4,675 4,698 3,419 3,676 3,772 - % ---------------------------------------------------------------------------------------------------------------------------------- /(a)/ The fourth quarter of 2001 is based on estimates. ----------------------------------------------------------------------------------------------------------------------------------
Key Points o Cash efficiency ratio best since 1999 o Net interest margin improved approximately 9 bps to 3.81% /(1)/ o Tier 1 capital ratio of 7.03% o FTE' s declined by 1,488 from September 30, 2001, including 890 reduction relating to former Wachovia credit card divestiture /(1)/Versus Combined 3Q01 adjusted for management estimates of the effect of purchase accounting adjustments for the full quarter 4
Net Interest Income [WACHOVIA LOGO] ------------------------------------------------------------------------------------------------------------------------------------ Interest Income Summary 2001 2000 Combined ------------------------------------------- ------- 4 Q 01 -------------------- Fourth Third Second First Fourth vs Third 4 Q 01 vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 Quarter 3 Q 01 ------------------------------------------------------------------------------------------------------------------------------------ Average earning assets $ 259,884 219,672 204,673 203,720 202,606 18 % $ 261,372 (1)% Average interest-bearing liabilities 231,763 198,322 185,224 183,995 181,832 17 232,986 (1) ------------------------------------------------------------------------------------------------------------------------------------ Interest income (Tax-equivalent) 4,363 3,988 3,851 4,057 4,289 9 4,689 (7) Interest expense 1,879 2,014 2,109 2,323 2,532 (7) 2,342 (20) ------------------------------------------------------------------------------------------------------------------------------------ Net interest income (Tax-equivalent) $ 2,484 1,974 1,742 1,734 1,757 26 % $ 2,347 6 % ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Net interest income increased 6% vs. Combined 3Q01; majority of growth attributable to wider spreads and core deposit growth 5
Fee and Other Income [WACHOVIA LOGO] ------------------------------------------------------------------------------------------------------------------------------------ Fee and Other Income 2001 2000 Combined ------------------------------------------------ ------- 4 Q 01 ------------------ Fourth Third Second First Fourth vs Third 4 Q 01 vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 Quarter 3 Q 01 ------------------------------------------------------------------------------------------------------------------------------------ Service charges and fees $ 672 541 486 468 481 24 % $ 658 2% Commissions 448 356 389 375 383 26 396 13 Fiduciary and asset management fees 478 400 384 381 387 20 460 4 Advisory, underwriting and other investment banking fees 223 177 238 198 187 26 192 16 Principal investing (21) (585) (58) (43) (43) 96 (587) 96 Other income 260 147 190 167 187 77 175 49 ------------------------------------------------------------------------------------------------------------------------------------ Total fee and other income $ 2,060 1,036 1,629 1,546 1,582 99 % $ 1,294 59% ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Revenue up in every category, particularly in market-related revenue when compared to a weak 3Q01 o Fee and other income increased 11% vs. Combined 3Q01, excluding principal investing o Other income increase driven by strong mortgage income ($28 million increase), home equity-related income ($37 million increase)and lower securities losses ($19 million improvement) 6
Noninterest Expense [WACHOVIA LOGO] ------------------------------------------------------------------------------------------------------------------------------------ Noninterest Expense 2001 2000 Combined --------------------------------------- ------ 4 Q 01 ------------------ Fourth Third Second First Fourth vs Third 4 Q 01 vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 Quarter 3 Q 01 ------------------------------------------------------------------------------------------------------------------------------------ Salaries and employee benefits $ 1,663 1,374 1,363 1,329 1,243 21 % $1,661 - % Occupancy 210 176 155 163 150 19 211 - Equipment 247 214 198 205 221 15 258 (4) Advertising 21 15 11 9 16 40 23 (9) Communications and supplies 142 117 111 110 123 21 144 (1) Professional and consulting fees 113 79 69 73 97 43 115 (2) Sundry expense 295 218 185 171 202 35 245 20 ------------------------------------------------------------------------------------------------------------------------------------ Noninterest expense, excluding goodwill and other intangible amortization 2,691 2,193 2,092 2,060 2,052 23 $2,657 1 % Goodwill and other intangible amortization 251 117 77 78 80 - ------------------------------------------------------------------------------------------------------------------------------------ Total noninterest expense $ 2,942 2,310 2,169 2,138 2,132 27 % ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Expenses flat to down in every category except sundry expense o Salaries and benefits were flat despite higher incentive payments on increased revenue o Sundry expense increased due to higher legal expenses as well as costs associated with increased loan and brokerage volumes 7 Consolidated Results Operating Summary [WACHOVIA LOGO] -------------------------------------------------------------------------------- Wachovia Corporation Performance Summary (In millions) Three Months Ended December 31, 2001 ------------------------------------ General Capital Wealth Corporate and Income statement data Bank Management Management Investment Bank Parent Consolidated ------------------------------------------------------------------------------------------------------------------------------------ Net interest income (Tax-equivalent) $ 1,642 37 91 656 58 2,484 Fee and other income 595 786 136 332 211 2,060 Intersegment revenue 32 (13) 1 (13) (7) - ------------------------------------------------------------------------------------------------------------------------------------ Total revenue (Tax-equivalent) 2,269 810 228 975 262 4,544 Provision for loan losses 129 - 4 254 (6) 381 Noninterest expense 1,243 669 161 552 317 2,942 Income taxes (Tax-equivalent) 327 54 21 13 422 ------------------------------------------------------------------------------------------------------------------------------------ Operating earnings $ 570 87 42 156 (56) 799 ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ Performance and other data -------------------------- Economic profit $ 404 59 30 36 66 595 Risk adjusted return on capital (RAROC) /a/ 39.14% 36.71 45.71 13.89 29.48 26.56 Economic capital, average /a/ $ 5,913 947 358 7,512 1,463 16,193 Cash overhead efficiency ratio 54.74% 82.71 70.10 52.52 n/m 59.22 Average loans, net $ 97,212 337 8,148 46,265 10,877 162,839 Average core deposits $135,426 1,505 9,431 12,710 2,754 161,826 ------------------------------------------------------------------------------------------------------------------------------------ /a/ Internal cost of capital will be 11% beginning January 1, 2002, versus 12% used in 2001. ------------------------------------------------------------------------------------------------------------------------------------
Key Points o General Bank earned over 70% of consolidated operating earnings and 68% of economic profit o All key businesses exceeded their cost of capital o Cash basis overhead efficiency ratio improved in all key businesses o Internal cost of capital will be 11% in 2002 vs. 12% in 2001 8 General Bank Operating Summary [WACHOVIA LOGO] --------------------------------------------------------------------------------
2001 2000 Combined General Bank ----------------------------------------- ------- 4 Q 01 --------------------- Performance Summary Fourth Third Second First Fourth vs Third 4 Q 01 vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 Quarter 3 Q 01 ------------------------------------------------------------------------------------------------------------------------------------ Income statement data --------------------- Net interest income (Tax-equivalent) $ 1,642 1,282 1,140 1,087 1,104 28% $ 1,556 6% Fee and other income 595 445 388 341 355 34 544 9 Intersegment revenue 32 30 27 25 25 7 32 - ------------------------------------------------------------------------------------------------------------------------------------ Total revenue (Tax-equivalent) 2,269 1,757 1,555 1,453 1,484 29 2,132 6 Provision for loan losses 129 98 98 101 74 32 Noninterest expense 1,243 1,025 937 907 977 21 $ 1,247 -% Income taxes (Tax-equivalent) 327 223 176 154 147 47 ------------------------------------------------------------------------------------------------------------------------------------ Operating earnings $ 570 411 344 291 286 39% ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ Performance and other data -------------------------- Economic profit $ 404 285 256 220 190 42% Risk adjusted return on capital (RAROC) 39.14% 37.23 39.88 37.25 32.53 - Economic capital, average $ 5,913 4,468 3,694 3,526 3,689 32 Cash overhead efficiency ratio 54.74% 57.86 59.26 61.42 64.89 - Average loans, net $ 97,212 76,618 65,489 63,370 61,735 27 $ 96,126 1% Average core deposits $135,426 110,771 99,403 98,392 98,184 22% $133,549 1% ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Revenue up 6% vs. Combined 3Q01; up 5% excluding mortgage results o Fee growth driven largely by strong mortgage banking; excluding this, fee income up 3% o Loan growth driven by robust home equity production o Core deposits up 1% driven by strong growth in low-cost core deposits of 5% o Cash efficiency ratio showed improvement for the quarter; expected to return to around 57%-58% in 1Q02 9 General Bank [WACHOVIA LOGO] Key Operating Measures -------------------------------------------------------------------------------
General Bank Key Metrics 2001 2000 -------------------------------------------- ------- 4 Q 01 Fourth Third Second First Fourth vs Quarter Quarter Quarter Quarter Quarter 3 Q 01 ----------------------------------------------------------------------------------------------------------------- Customer overall satisfaction score /a/ 6.35 6.33 6.32 6.29 6.27 - % Mystery Customer Profile scores /b/ 90.00% 90.01 88.77 88.29 86.81 - Online customers (Enrollments in thousands) 4,123 3,810 2,903 2,640 2,367 8 Financial centers 2,846 2,853 2,162 2,164 2,193 - ATMs 4,675 4,698 3,419 3,676 3,772 - % -----------------------------------------------------------------------------------------------------------------
/a/ Gallup survey measured for customers of former First Union only; on a 1-7 scale; 6.4 = "best in class". /b/ Customer Service Profile measured for customers of former Wachovia only; perfect score of 100%. ------------------------------------------------------------------------------- Key Points o Legacy First Union customer satisfaction scores increased for 11th consecutive quarter o Legacy Wachovia customer satisfaction scores remain stable o Completed the divestiture of one branch; 37 branch divestiture scheduled for 1Q02 10 Capital Management [WACHOVIA LOGO] Operating Summary -------------------------------------------------------------------------------
Capital Management 2001 2000 4 Q 01 Combined ------------------------------------------- ------- -------------------- Performance Summary Fourth Third Second First Fourth vs Third 4 Q 01 vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 Quarter 3 Q 01 -------------------------------------------------------------------------------------------------------------- -------------------- Income statement data --------------------- Net interest income (Tax-equivalent) $ 37 32 30 32 40 16 % $ 38 (3) % Fee and other income 786 655 693 685 692 20 717 10 Intersegment revenue (13) (12) (12) (11) (12) 8 (13) - -------------------------------------------------------------------------------------------------------------- -------------------- Total revenue (Tax-equivalent) 810 675 711 706 720 20 742 9 Provision for loan losses - - - - - - Noninterest expense 669 573 583 574 574 17 $ 638 5 % Income taxes (Tax-equivalent) 54 36 43 46 49 50 -------------------------------------------------------------------------------------------------------------- -------------------- Operating earnings $ 87 66 85 86 97 32 % -------------------------------------------------------------------------------------------------------------- -------------------- -------------------------------------------------------------------------------------------------------------- -------------------- Performance and other data --------------------------- Economic profit $ 59 40 61 62 72 48 % Risk adjusted return on capital (RAROC) 36.71 % 30.89 41.73 42.70 46.09 - Economic capital, average $ 947 846 815 821 836 12 Cash overhead efficiency ratio 82.71 % 84.85 81.91 81.28 79.65 - Average loans, net $ 337 269 110 129 104 25 $ 283 19 % Average core deposits $ 1,505 1,535 1,609 1,827 2,142 (2) % $ 1,556 (3) % --------------------------------------------------------------------------------------------------------------- -------------------
Key Points o Revenue up 9% vs. Combined 3Q01 driven by recovering securities markets and good sales o Mutual fund and annuity sales of $2.7 billion and $1.5 billion, respectively o Expenses higher vs. Combined 3Q01 due to improved retail brokerage production 11 Capital Management {WACHOVIA LOGO] Key Operating Measures --------------------------------------------------------------------------------
Capital Management Key Metrics 2001 2000 4 Q 01 -------------------------------------------------- -------- Fourth Third Second First Fourth vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 ----------------------------------------------------------------------------------------------------------------------- Separate account assets $ 122,439 124,592 81,879 81,576 85,933 (2) % Mutual fund assets 104,031 101,749 90,279 86,767 84,797 2 ----------------------------------------------------------------------------------------------------------------------- Total assets under management /a/ $ 226,470 226,341 172,158 168,343 170,730 - ----------------------------------------------------------------------------------------------------------------------- Gross fluctuating mutual fund sales $ 2,684 2,213 1,981 1,983 1,762 21 ----------------------------------------------------------------------------------------------------------------------- Assets under care (Excluding AUM) /b/ $ 512,649 488,537 499,847 489,380 485,516 5 ----------------------------------------------------------------------------------------------------------------------- Registered representatives (Actual) 8,008 8,188 7,706 7,784 7,459 (2) Broker client assets $ 275,500 258,300 240,600 232,900 240,600 7 Margin loans $ 3,244 3,192 3,060 3,060 3,556 2 Brokerage offices (Actual) 3,434 3,461 2,690 2,695 2,568 (1) % -----------------------------------------------------------------------------------------------------------------------
/a/ Includes $78 billion in assets managed for Wealth Management which are also reported in that segment. /b/ Includes $23 billion in assets held for Wealth Management which are also reported in that segment. ------------------------------------------------------------------------------- Key Points o Mutual fund assets grew 2% to $104 billion o Broker client assets grew 7%, driven by higher period-end valuations o Registered representatives declined principally due to focus on higher producing brokers 12
Wealth Management Operating Summary [WACHOVIA LOGO] ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ 2001 2000 Combined Wealth Management --------------------------------------------- ------ 4 Q 01 ------------------------- Performance Summary Fourth Third Second First Fourth vs Third 4 Q 01 vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 Quarter 3 Q 01 ------------------------------------------------------------------------------------------------------------------------------------ Income statement data --------------------- Net interest income (Tax-equivalent) $ 91 61 48 46 47 49 % $ 84 8 % Fee and other income 136 100 79 79 84 36 136 - Intersegment revenue 1 - - - - - 1 - ------------------------------------------------------------------------------------------------------------------------------------ Total revenue (Tax-equivalent) 228 161 127 125 131 42 221 3 Provision for loan losses 4 2 - - - - Noninterest expense 161 114 85 84 84 41 $ 169 (5) % Income taxes (Tax-equivalent) 21 15 13 15 16 40 ------------------------------------------------------------------------------------------------------------------------------------ Operating earnings $ 42 30 29 26 31 40 % ------------------------------------------------------------------------------------------------------------------------------------ Performance and other data -------------------------- Economic profit $ 30 22 22 20 25 36 % Risk adjusted return on capital (RAROC) 45.71 % 48.07 62.73 62.09 72.41 - Economic capital, average $ 358 237 171 165 164 51 Cash overhead efficiency ratio 70.10 % 71.09 65.81 67.07 63.82 - Average loans, net $ 8,148 5,680 4,449 4,368 4,319 43 $7,994 2 % Average core deposits $ 9,431 7,313 6,367 6,176 5,737 29 % $9,240 2 % ------------------------------------------------------------------------------------------------------------------------------------
Wealth Management Key Metrics 2001 2000 ------------------------------------------- --------- 4 Q 01 Fourth Third Second First Fourth vs (Dollars in millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 ------------------------------------------------------------------------------------------------------------------------------------ Assets under management /a/ $77,800 77,700 48,100 47,900 52,500 - % PCM/PFA client relationships (Actual) 86,300 86,200 52,500 52,450 52,400 - Wealth Management advisors (Actual) 936 936 552 558 556 - % ------------------------------------------------------------------------------------------------------------------------------------
/a/ These assets are managed by and reported in Capital Management. -------------------------------------------------------------------------------- Key Points o Revenue grew 3% driven by solid increases in loans and deposits vs. Combined 3Q01 o Fees flat, as higher insurance commissions and deposit service charges offset were by reduced trust fees on lower average equity values 13 Corporate and Investment Bank Operating Summary [WACHOVIA LOGO] -------------------------------------------------------------------------------- 2001 2000 Combined ------------------------------------------------ --------- ------------------------------ Corporate and Investment Bank 4 Q 01 Performance Summary Fourth Third Second First Fourth vs Third 4 Q 01 vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 Quarter 3 Q 01 ------------------------------------------------------------------------------------------------------------------------------------ Income statement data --------------------- Net interest income (Tax-equivalent) $ 656 497 475 447 440 32% $ 571 15% Fee and other income 332 (250) 334 314 268 - (194) - Intersegment revenue (13) (16) (15) (12) (13) (19) (13) - ------------------------------------------------------------------------------------------------------------------------------------ Total revenue (Tax-equivalent) 975 231 794 749 695 - 364 - Provision for loan losses 254 126 93 70 124 - Noninterest expense 552 480 497 470 411 15 $ 549 1% Income taxes (Tax-equivalent) 13 (169) 48 50 (27) - ------------------------------------------------------------------------------------------------------------------------------------ Operating earnings $ 156 (206) 156 159 187 -% ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ Performance and other data -------------------------- Economic profit $ 36 (355) 4 (5) 51 -% Risk adjusted return on capital (RAROC) 13.89% (10.44) 12.25 11.68 15.31 - Economic capital, average $ 7,512 6,267 5,989 6,185 6,162 20 Cash overhead efficiency ratio 52.52% n/m 59.94 59.94 50.24 - Average loans, net $46,265 42,074 41,145 42,751 41,770 10 $48,390 (4)% Average core deposits $12,710 10,512 10,200 9,456 9,232 21% $12,054 5% ------------------------------------------------------------------------------------------------------------------------------------
Key Points o Revenues rebounded 3% (excluding principal investing) vs. Combined 3Q01 o Provision increase primarily a result of a single large charge-off in the energy services sector of $97 million o Cash efficiency ratio showed solid improvement o Average loans declined 4% largely due to lower loan demand and $1.5 billion of 3Q01 transfers to loans held for sale 14 Loan and Deposit Growth [WACHOVIA LOGO] -------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------- ------------------------ Average Balance Sheet Data 2001 2000 4 Q 01 Combined --------------------------------------------- -------- ------------------------ Fourth Third Second First Fourth vs Third 4 Q 01 vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 Quarter 3 Q 01 --------------------------------------------------------------------------------------------------------- ------------------------ Commercial loans $ 102,230 83,633 76,378 77,270 76,253 22 % $ 105,903 (3) % Consumer loans 60,609 49,393 42,834 42,580 43,840 23 61,617 (2) --------------------------------------------------------------------------------------------------------- ------------------------ Total loans 162,839 133,026 119,212 119,850 120,093 22 % 167,520 (3) % --------------------------------------------------------------------------------------------------------- ------------------------ Core interest-bearing deposits 124,784 102,285 91,654 91,149 91,069 22 % 123,454 1 % Noninterest-bearing deposits 37,042 29,918 27,381 27,043 27,875 24 35,530 4 --------------------------------------------------------------------------------------------------------- ------------------------ Total core deposits 161,826 132,203 119,035 118,192 118,944 22 158,984 2 Foreign and other time deposits 17,646 18,015 17,944 19,090 19,385 (2) 20,620 (14) --------------------------------------------------------------------------------------------------------- ------------------------ Total deposits $ 179,472 150,218 136,979 137,282 138,329 19 % $ 179,604 - % --------------------------------------------------------------------------------------------------------- ------------------------
Key Points o Commercial loans $3.1 billion lower vs. Combined 3Q01 levels driven by effective portfolio management actions to increase RAROCs and decrease excess exposures, as well as the effects of lower loan demand o Consumer loans up 1%, excluding the effects of a $2.9 billion swap of mortgages for agency-guaranteed mortgage-backed securities and continued auto finance runoff o Core deposits up 2%, driven by low-cost core growth of 5% with some seasonality benefit in DDAs o Continued to reduce purchased deposits due to core deposit growth 15 Asset Quality [WACHOVIA LOGO] -------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------- Asset Quality 2001 2000 --------------------------------------- ------ 4 Q 01 Fourth Third Second First Fourth vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 ------------------------------------------------------------------------------------------------------------------------- Nonperforming assets Nonaccrual loans $ 1,534 1,506 1,223 1,231 1,176 2 % Foreclosed properties 179 126 104 106 103 42 ------------------------------------------------------------------------------------------------------------------------- Total nonperforming assets $ 1,713 1,632 1,327 1,337 1,279 5 % ------------------------------------------------------------------------------------------------------------------------- as % of loans, net and foreclosed properties 1.04 % 0.96 1.08 1.09 1.03 - ------------------------------------------------------------------------------------------------------------------------- Nonperforming loans in loans held for sale $ 228 273 250 344 334 (16) % ------------------------------------------------------------------------------------------------------------------------- Total nonperforming assets in loans and in loans held for sale $ 1,941 1,905 1,577 1,681 1,613 2 % ------------------------------------------------------------------------------------------------------------------------- as % of loans, net, foreclosed properties and loans in other assets as held for sale 1.13 % 1.08 1.23 1.30 1.22 - ------------------------------------------------------------------------------------------------------------------------- Allowance for loan losses Balance, beginning of period $ 3,039 1,760 1,759 1,722 1,720 73 % Former Wachovia balance, September 1, 2001 - 766 - - - - Loan losses, net (378) (243) (157) (159) (192) 56 Allowance relating to loans transferred or sold (47) (368) (65) (23) 2 (87) Provision for loan losses related to loans transferred 3 230 36 15 - (99) Provision for loan losses 378 894 187 204 192 (58) ------------------------------------------------------------------------------------------------------------------------- Balance, end of period $ 2,995 3,039 1,760 1,759 1,722 (1) % ------------------------------------------------------------------------------------------------------------------------- as % of loans, net 1.83 % 1.79 1.44 1.43 1.39 - as % of nonaccrual and restructured loans /a/ 195 202 144 143 146 - as % of nonperforming assets /a/ 175 % 186 133 132 135 - ------------------------------------------------------------------------------------------------------------------------- Loan losses, net $ 378 243 157 159 192 56 % Commercial, as % of average commercial loans 1.19 % 0.85 0.55 0.56 0.80 - Consumer, as % of average consumer loans 0.48 0.53 0.48 0.48 0.36 - Total, as % of average loans, net 0.93 % 0.73 0.52 0.53 0.64 - ------------------------------------------------------------------------------------------------------------------------- Past due loans, 90 days and over Commercial, as a % of loans, net 1.38 % 1.30 1.41 1.31 1.17 - Consumer, as a % of loans, net 0.62 % 0.68 0.73 0.93 0.95 - ------------------------------------------------------------------------------------------------------------------------- /a/ These ratios do not include nonperforming loans included in other assets as held for sale. -------------------------------------------------------------------------------------------------------------------------
Key Points o Total NPAs up only $36 million; excluding a large credit in the energy services industry and Argentine exposure, NPAs down $164 million o Total NPAs, including loans held for sale, were down to $1.94 billion from year-end 2000 levels of $2.13 billion (adjusted for former Wachovia) o Net loan losses totaled $281 million or 0.69% of average net loans excluding $97 million of losses associated with a large company in the energy services industry o Allowance totals $3.0 billion, or 1.83% of loans and 195% of nonperforming loans o Provision exceeded charge-offs by $3 million due to transfer of $72 million of loans to loans held for sale o Foreclosed property increase includes $35 million foreclosure on properties related to a large retailer 16 Nonperforming Loans [WACHOVIA LOGO] -------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------- Nonperforming Loans /a/ 2001 2000 ---------------------------------------------- --------- 4 Q 01 Fourth Third Second First Fourth vs (In millions) Quarter Quarter Quarter Quarter Quarter 3 Q 01 -------------------------------------------------------------------------------------------------------------------------------- Balance, beginning of period $ 1,506 1,223 1,231 1,176 854 23 % -------------------------------------------------------------------------------------------------------------------------------- Commercial nonaccrual loan activity Commercial nonaccrual loans, beginning of period 1,316 1,088 1,026 939 654 21 Former Wachovia balance, September 1, 2001 - 209 - - - - -------------------------------------------------------------------------------------------------------------------------------- New nonaccrual loans and advances 668 376 361 314 532 78 Charge-offs (335) (193) (125) (125) (166) 74 Transfers (to) from loans held for sale - (20) - - 11 - Transfers (to) from other real estate owned (40) (5) - - - - Sales (64) (36) (50) - (15) 78 Other, principally payments (164) (103) (124) (102) (77) 59 -------------------------------------------------------------------------------------------------------------------------------- Net commercial nonaccrual loan activity 65 19 62 87 285 - -------------------------------------------------------------------------------------------------------------------------------- Commercial nonaccrual loans, end of period 1,381 1,316 1,088 1,026 939 5 -------------------------------------------------------------------------------------------------------------------------------- Consumer nonaccrual loan activity Consumer nonaccrual loans, beginning of period 190 135 205 237 200 41 Former Wachovia balance, September 1, 2001 - 33 - - - - -------------------------------------------------------------------------------------------------------------------------------- Transfers (to) from loans held for sale (22) (53) (123) (90) - (58) Sales and securitizations (91) - - - - - Other, net 76 75 53 58 37 1 -------------------------------------------------------------------------------------------------------------------------------- Net consumer nonaccrual loan activity (37) 22 (70) (32) 37 - -------------------------------------------------------------------------------------------------------------------------------- Consumer nonaccrual loans, end of period 153 190 135 205 237 (19) -------------------------------------------------------------------------------------------------------------------------------- Balance, end of period $ 1,534 1,506 1,223 1,231 1,176 2 % --------------------------------------------------------------------------------------------------------------------------------
/a/Excludes nonperforming loans included in loans held for sale, which in the fourth, third, second and first quarters of 2001 and in the fourth quarter of 2000 were $228 million, $273 million, $250 million, $344 million and $334 million, respectively. ------------------------------------------------------------------------------- Key Points o New commercial nonaccruals increase largely due to exposure to an energy services company and Argentine exposure o Sold or securitized $155 million of nonperforming loans out of the loan portfolio; $64 million of commercial and $91 million of consumer 17 Loans Held for Sale [WACHOVIA LOGO] --------------------------------------------------------------------------------
Loans Held for Sale /a/ 2001 2000 ---------------------------------------------- ------- Fourth Third Second First Fourth (In millions) Quarter Quarter Quarter Quarter Quarter ----------------------------------------------------------------------------------------------------------------------------------- Balance, beginning of period $ 6,837 5,963 6,790 8,146 9,091 Former Wachovia balance as of September 1, 2001 /b/ - 297 - - - Originations 7,471 4,955 5,279 4,773 2,701 Performing loans transferred to (from) loans held for sale, net (43) 1,351 (189) 192 (556) Nonperforming loans transferred to (from) loans held for sale, net 35 79 128 90 - Allowance for loan losses related to loans transferred to loans held for sale /c/ (10) (262) (40) (23) 2 Lower of cost or market valuation adjustments (58) (15) (35) (80) (144) Performing loans sold (5,845) (5,177) (5,535) (5,910) (2,402) Nonperforming loans sold (106) (88) (130) (45) (91) Other, net /d/ (518) (266) (305) (353) (455) ----------------------------------------------------------------------------------------------------------------------------------- Balance, end of period /e/ $ 7,763 6,837 5,963 6,790 8,146 ----------------------------------------------------------------------------------------------------------------------------------- /a/ All activity excludes other real estate owned. /b/ Beginning balance and transfers of former Wachovia loans to loans held for sale are shown net of $82 million in allowance for loan losses on these loans and $102 million in purchase accounting adjustments in the third quarter of 2001. /c/Excludes $82 million of allowance associated with former Wachovia loans and $24 million of allowance and provision associated with loans sold directly out of the loan portfolio in the third quarter of 2001. /d/ Other, net represents primarily loan payments. /e/ Nonperforming loans included in loans held for sale in the fourth quarter of 2001 were $228 million. Former First Union nonperforming loans included in loans held for sale in the third, second and first quarters of 2001 and in the fourth quarter of 2000 were $195 million, $250 million, $344 million and $334 million, respectively. The former Wachovia balance as of September 30, 2001, included nonperforming loans of $78 million.
Key Points o Of the $1.5 billion of higher risk and overlapping loans moved to loans held for sale in 3Q01, sales to date total $217 million o Sold $106 million of nonperforming loans out of loans held for sale 18
Merger Update [WACHOVIA LOGO] ------------------------------------------------------------------------------------------------------------------------------------ Merger Integration Metrics 4Q 3Q Total as a Run rate as 2001 2001 Total % of goal Goal Run rate /b/ a % of goal ------------------------------------------------------------------------------------------------------------------------------------ Annual expense efficiencies/a/ (In millions) $ 62 12 86 10% $ 890 248 28% One-time charges (In millions) $ 172 147 319 21 $ 1,525/c/ Position reductions/d/ 590 863 1,905 27 7,000 Branch consolidations - - - -% 250-300 ------------------------------------------------------------------------------------------------------------------------------------ Target Goal ------------------------ 2002 2003 2004 Customer satisfaction scores (TBD 2 Q 02) New/Lost ratio /e/ (TBD 2 Q 02) ------------------------------------------------------------------------------------------------------------------------------------
/a/ Expense efficiencies calculated from annualized combined 4Q00 base (excluding commissions, incentives, amortization and restructuring or merger costs). Year-to-date total includes $12 million of pre-close expense efficiencies. /b/ Most recent quarter annualized. During 2002 additional merger efficiencies will be realized and additional merger costs incurred. Expected cumulative net merger expense efficiencies of $490 millon in 2002. /c/ Includes $75 million of unanticipated costs associated with hostile takeover attempt. /d/ Represents change in FTE position from pro forma combined December 31,2000, base of 85,885 and excludes divested businesses and the impact of strategic repositioning. Year-to date total includes 452 of pre-close position reductions. /e/ New core customers gained divided by core customers lost. Core customers exclude single-service credit card, mortgage and trust customers and out of footprint customers. Key Points 4Q01 Achievements ----------------- o Annualized run rate of $248 million in expense efficiencies o 41 of 176 major system-related activities have been completed including: - Payroll system converted - Benefits system converted with 65% of employees enrolling online - Fixed income and derivatives system converted - SOLD/Sales tracking system converted - Accounts payable system converted 1Q02 Activities --------------- o 37 branches scheduled for divestiture o Began single customer satisfaction survey on January 1; will begin reporting 2Q02 o Readiness assessment testing to ensure seamless conversion o Purchasing system conversion o Mortgage company system conversion 19 Summary [WACHOVIA LOGO] -------------------------------------------------------------------------------- 4Q01-Wachovia has momentum -------------------------- o Strong revenue growth - Revenue growth in all four core businesses - General Bank improvement continues; Wealth Management posted solid growth - Capital Management and Corporate and Investment Bank rebound o Expense control evident o NPAs declined 7% excluding a single large credit and Argentine exposure o Improved Tier 1 capital ratio 28 bps o Merger integration on track and progressing well 20 2002 Outlook [WACHOVIA LOGO] -------------------------------------------------------------------------------- ---------------------------------------- ------------------------------------- Combined ** 2001 Cash Operating Earnings 2002 Outlook (In millions) ---------------------------------------- ------------------------------------- $ 9,447 Net interest income /1/ Net interest margin Relatively stable vs. 4Q01 8,078 Fee and other income -------- 17,525 Total revenue Low to mid single digit growth 1,333 Provision Charge-offs 60-80 bps 10,686 Cash expenses (86) Expense efficiencies $490 million -------- 10,600 Total cash expenses Flat; unless markets rebound Goodwill amortization None 571 Intangibles amortization Approximately $620 million -------- 5,021 Income before taxes 1,730 Income taxes (1) -------- $ 3,291 Adjusted operating income Average diluted shares No material change Average loans Low single digit growth from 4Q01 Tier 1 capital ratio 7.80%-8.0% by year-end 2002 Dividend payout ratio target 30%-35% of cash earnings $ 2.70 Diluted cash operating EPS **Illustrative Combined 2001 Operating Earnings results presented in this slide were prepared using Wachovia's reported 4Q01 operating results, plus results presented in the pro forma presentation in Exhibit 99 of 3Q01 10-Q (excluding the adjustments column), excluding: (i) items not included in former First Union's nine months operating results, including merger, restructuring and restructuring-related charges, and certain credit actions more fully described in the 3Q01 10-Q; (ii) $585 million 3Q01 principal investing losses in fee and other income; (iii) $104 million reduction in the provision reflecting credit actions taken by former Wachovia prior to the merger; and (iv) $122 million in restructuring and merger-related charges taken by former Wachovia prior to merger. Assumed a 34.5% effective tax rate and 1,387 million shares outstanding. 2001 results presented in this slide are for illustrative purposes only and were not prepared using generally accepted accounting principles. (1) Tax equivalent 21 Cautionary Statement [WACHOVIA LOGO] -------------------------------------------------------------------------------- The foregoing supplemental materials may contain, among other things, certain forward-looking statements with respect to Wachovia Corporation ("Wachovia"), as well as the goals, plans, objectives, intentions, expectations, financial condition, results of operations, future performance and business of Wachovia, including, without limitation, (i) statements relating to certain of Wachovia's goals and expectations with respect to earnings, earnings per share, revenue, expenses, and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (ii) statements preceded by, followed by or that include the words "may", "could", "would", "should", "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets" "probably", "potentially", "projects", "outlook" or similar expressions. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond Wachovia's control). The following factors, among others, could cause Wachovia's financial performance to differ materially from the goals, plans, objectives, intentions, and expectations expressed in such forward-looking statements: (1) the risk that the businesses of former First Union Corporation and former Wachovia Corporation in connection with their merger (the "Merger") will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the Merger may not be fully realized or realized within the expected time frame; (3) revenues following the Merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the Merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the strength of the United States economy in general and the strength of the local economies in which Wachovia conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on Wachovia's loan portfolio and allowance for loan losses; (6) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (7) inflation, interest rate, market and monetary fluctuations; (8) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on Wachovia's capital markets and capital management activities, including, without limitation, its mergers and acquisition advisory business, equity and debt underwriting activities, private equity investment activities, derivative securities activities, investment and wealth management advisory businesses, and brokerage activities; (9) adverse changes in the financial performance and/or condition of Wachovia's borrowers which could impact the repayment of such borrowers' outstanding loans; and (10) the impact on Wachovia's businesses, as well as on the risks set forth above, of various domestic or international military or terrorist activities or conflicts. Additional information with respect to factors that may cause actual results to differ materially from those contemplated by such forward-looking statements is included in the reports filed by Wachovia with the Securities and Exchange Commission, including its Current Report on Form 8-K dated January 23, 2002. Wachovia cautions that the foregoing list of factors is not exclusive. All subsequent written and oral forward-looking statements concerning the Merger or other matters and attributable to Wachovia or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. Wachovia does not undertake any obligation to update any forward-looking statement, whether written or oral. 22