EX-99.A 2 dex99a.htm THE EARNINGS RELEASE The Earnings Release
Table of Contents

Exhibit (99)(a)

LOGO

 

LOGO   Press Release October 19, 2007

WACHOVIA EARNS $1.69 BILLION, EPS OF 89 CENTS PER SHARE

Strength in core banking and brokerage businesses offset by impact of global fixed income market disruption

 

3rd QUARTER 2007 COMPARED WITH 3rd QUARTER 2006

 

•  

Lower earnings reflecting disruption in the capital markets resulting in valuation losses of $1.3 billion before tax and reduced origination and distribution revenues in the Corporate and Investment Bank.

 

•  

Revenue growth led by a 28 percent increase in net interest income, including Golden West, coupled with disciplined expense control partially offset lower fee income.

 

•  

Average loans up 53 percent, driven by higher consumer real estate loans related to the Golden West acquisition, and strong organic growth in commercial, international and auto lending.

 

•  

Average core deposits up 30 percent, including Golden West. Sales productivity solid in expanded markets.

 

•  

Net charge-offs rose 3 basis points to an annualized 0.19 percent of average net loans. Increased provision for credit losses reflects modest deterioration in credit quality, a more uncertain credit environment and loan growth. Higher nonperforming assets largely related to Golden West consumer real estate NPAs and to higher commercial real estate NPAs largely related to downgrades of residential developers.

 

•  

Customer loyalty scores at near record 53.1 percent; organic customer acquisition grew 14.8 percent annualized.

Earnings Highlights

 

     Three Months Ended
     September 30,
2007
   

June 30,

2007

    September 30,
2006

(In millions, except per share data)

    Amount
     EPS
    Amount
    EPS
    Amount
    EPS

Earnings

                                 

Net income (GAAP)

    $ 1,690     0.89    2,341    1.22    1,877    1.17

Net merger-related and restructuring expenses

      22     0.01    20    0.01    25    0.02
    
 
  
  
  
  

Earnings excluding merger-related and restructuring expenses

    $ 1,712     0.90    2,361    1.23    1,902    1.19
    
 
  
  
  
  

Financial ratios

                                 

Return on average common stockholders' equity

      9.60  %        13.54         14.85     

Net interest margin (a)

      2.92          2.94         3.03     

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

      37.59          48.38         49.20     

Overhead efficiency ratio (a)

      59.55  %        55.85         57.44     
    
      
       
    

Capital adequacy (b)

                                 

Tier 1 capital ratio

      7.2  %        7.5         7.7     

Total capital ratio

     11.0          11.5         11.5     

Leverage ratio

      6.1  %        6.2         6.6     
    
      
       
    

Asset quality (c)

                                 

Allowance for loan losses as % of nonaccrual and restructured loans

      135  %        182         520     

Allowance for loan losses as % of loans, net

      0.78          0.79         1.03     

Allowance for credit losses as

                                 

% of loans, net (d)

      0.82          0.83         1.09     

Net charge-offs as % of average loans, net

      0.19          0.14         0.16     

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

      0.63 %        0.47         0.26     

 

(a) Tax-equivalent.
(b) The third quarter of 2007 is based on estimates.
(c) Asset quality ratios at September 30 and June 30, 2007, reflect the impact of Golden West.
(d) 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 $1.69 BILLION, EPS OF 89 CENTS PER SHARE/page 2

 

CHARLOTTE, N.C. — Wachovia Corp. (NYSE:WB) today reported net income of $1.69 billion, or 89 cents per share, in the third quarter of 2007 compared with $1.88 billion, or $1.17 per share, in the third quarter of 2006.

After-tax net merger-related expenses amounted to 1 cent per common share in the third quarter of 2007 and 2 cents per common share in the third quarter of 2006. Excluding these expenses, earnings were $1.71 billion, or 90 cents per share, in the third quarter of 2007 and $1.90 billion, or $1.19 per share, in the third quarter of 2006.

“I’m very proud of our ability to provide capital, liquidity and advice to our customers and peers in the face of the disruption in the fixed income markets in the third quarter. These conditions clearly had a disappointing impact on the results of market-oriented businesses, but the strength in our core banking and brokerage businesses continued to serve us very well,” said Ken Thompson, Wachovia chairman and chief executive officer. “Our loan and deposit trends were solid, and our retail brokerage performance was strong – and poised for even more growth as our A.G. Edwards colleagues join our team. Additionally, the first of our World Savings branch and deposit conversions was completed successfully last weekend, and going forward, attention in our expanded platform returns fully to sales production. While the impact of the market disruption was significant, it’s worth noting that the majority of the lower market valuations in the third quarter largely arose from a repricing of risk in the marketplace and do not reflect deterioration in the underlying credit quality of the assets in our leveraged finance and commercial real estate securitization businesses. Looking ahead, we’re taking the appropriate steps to ensure that as markets remain unsettled, we focus intently on actively managing our exposures and controlling costs. Longer term, we believe the challenges of the third quarter will be an advantage to companies like Wachovia with strong capital and liquidity positions and a clear understanding of the needs of customers and investors.”

Results in the third quarter of 2007 included the full quarter impact of the October 1, 2006, acquisition of Golden West. Results do not include the impact of the acquisition of A.G. Edwards, Inc., a retail brokerage firm headquartered in St. Louis, Missouri, which closed on October 1 of this year.

Wachovia Corporation

 

     Three Months Ended

(In millions)

    September 30,
2007
    June 30,
2007
    September 30,
2006

Net interest income (Tax-equivalent)

    $ 4,584    4,487    3,578

Fee and other income

      2,761    4,206    3,465

Total revenue (Tax-equivalent)

      7,345    8,693    7,043

Provision for credit losses

      408    179    108

Noninterest expense

      4,374    4,856    4,045

Net income

      1,690    2,341    1,877

Average loans, net

      429,801    421,257    281,110

Average core deposits

    $ 379,009    378,496    291,227

In the third quarter of 2007 compared with the third quarter of 2006, Wachovia:

 

  •  

Grew revenue 4 percent on higher loans and deposits, driven by the addition of Golden West and organic growth, while fee and other income declined reflecting disruption in the capital markets in fixed income and other market-related fees, including net valuation losses of:

 

  •  

$1.3 billion in the Corporate and Investment Bank on structured products and leveraged finance warehouse loans and commitments; and

 

  •  

$40 million in Capital Management on asset-backed commercial paper investments.

 

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WACHOVIA EARNS $1.69 BILLION, EPS OF 89 CENTS PER SHARE/page 3

 

  •  

Increased net interest income 28 percent reflecting growth in average commercial loans, up 16 percent, and higher average consumer loans, including the impact of acquisitions.

 

  •  

Generated strong commercial loan growth led by strength in middle-market commercial, large corporate and international lending. Increased consumer loans were led by higher real estate loans primarily due to the addition of Golden West, as well as growth in auto lending.

 

  •  

Also generated 30 percent growth in average core deposits while average low-cost core deposits were up 7 percent.

 

  •  

Generated continued strong performance in retail brokerage managed account fees and solid retail brokerage transaction activity. Strong principal investing results and higher traditional banking fees also contributed to growth.

 

  •  

Held noninterest expense growth, including the effect of acquisitions, to 8 percent largely reflecting lower revenue-based compensation in light of the market disruption.

 

  •  

Recorded a provision for credit losses of $408 million reflecting modest deterioration in credit quality, a more uncertain credit environment and loan growth. Net charge-offs were $206 million, or an annualized 0.19 percent of average net loans. Total nonperforming assets including loans held for sale were $3.0 billion, or 0.63 percent of loans, foreclosed properties and loans held for sale.

Earnings in the third quarter of 2007 included a $249 million after-tax benefit related to correction of errors primarily in earlier periods in 2007. This related primarily to incorrect application of hedge accounting to certain variable rate demand deposits in the second quarter of 2007. Wachovia’s management believes that this impact is not material to current or prior period financial statements, and the Audit Committee of Wachovia’s Board of Directors, based on information reviewed by management with the Committee, concurred with management’s conclusion.

Lines of Business

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

 

     Three Months Ended

(In millions)

    September 30,
2007
     June 30,
2007
    September 30,
2006

Net interest income (Tax-equivalent)

    $ 3,486     3,397    2,529

Fee and other income

      969     969    886

Total revenue (Tax-equivalent)

      4,500     4,407    3,451

Provision for credit losses

      214     160    120

Noninterest expense

      2,015     2,035    1,621

Segment earnings

    $ 1,443     1,405    1,086

Cash overhead efficiency ratio (Tax-equivalent)

      44.75 %   46.17    46.96

Average loans, net

    $ 297,295     294,369    162,501

Average core deposits

      290,693     290,970    208,705

Economic capital, average

    $ 11,556     11,502    7,121

General Bank

The General Bank includes retail, small business and commercial customers. The third quarter of 2007 compared with the third quarter of 2006 included:

 

  •  

Earnings of $1.4 billion on a 30 percent increase in revenue to $4.5 billion, driven by increased loans and deposits primarily reflecting the addition of Golden West, as well as strong organic growth. The business mix continued to shift, reflecting customer preference for fixed rate instead of variable rate loans and certificates of deposit over demand deposits.

 

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WACHOVIA EARNS $1.69 BILLION, EPS OF 89 CENTS PER SHARE/page 4

 

  •  

An increase in average loans of $134.8 billion including primarily consumer real estate loans from the Golden West acquisition. Organic growth was led by auto lending, middle market commercial and business banking loans.

 

  •  

Deposit growth led by consumer certificates of deposit, reflecting the addition of Golden West and organic growth. Net new retail checking accounts increased by 255,000 in the third quarter of 2007 compared with an increase of 139,000 in the year ago quarter. World Savings branches generated more than 20,000 of these new accounts. Year to date, net new retail checking accounts amounted to 832,000, compared with 554,000 in full year 2006.

 

  •  

9 percent higher fee and other income, with solid growth in service charges and interchange income offsetting lower mortgage banking fees.

 

  •  

A 221 basis point improvement to a 44.75 percent overhead efficiency ratio, which included the acquisition impact, de novo branch activity and other growth initiatives.

 

  •  

Increased provision as a result of higher auto, commercial and consumer real estate loan losses.

Wealth Management Highlights

 

     Three Months Ended

(In millions)

    September 30,
2007
     June 30,
2007
    September 30,
2006

Net interest income (Tax-equivalent)

    $ 183     181    176

Fee and other income

      185     202    197

Total revenue (Tax-equivalent)

      372     386    376

Provision for credit losses

      6     2    2

Noninterest expense

      252     255    249

Segment earnings

    $ 72     82    79

Cash overhead efficiency ratio (Tax-equivalent)

      67.87 %   65.89    66.34

Average loans, net

    $ 21,492     21,047    19,237

Average core deposits

      16,638     17,028    16,312

Economic capital, average

    $ 650     654    626

Wealth Management

Wealth Management includes private banking, personal trust, investment advisory services, charitable services, financial planning and insurance brokerage. The third quarter of 2007 compared with the third quarter of 2006 included:

 

  •  

Lower earnings of $72 million on flat revenue growth due to lower insurance commissions.

 

  •  

A 4 percent increase in net interest income on solid loan growth and modest deposit growth, partially offset by continued margin compression.

 

  •  

Record fiduciary and asset management fees, up 10 percent driven by client acceptance of the new investment platform introduced in 2006, new sales and higher market valuations, more than offset by a decline in insurance commissions largely related to an $11 million insurance commission receivables write-off and nonstrategic insurance account dispositions.

 

  •  

Relatively flat expenses due to efficiency initiatives.

 

  •  

14 percent growth in assets under management to $82.8 billion as a result of higher market valuations and new sales.

 

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WACHOVIA EARNS $1.69 BILLION, EPS OF 89 CENTS PER SHARE/page 5

 

Corporate and Investment Bank Highlights

 

     Three Months Ended
  

(In millions)

    September 30,
2007
     June 30,
2007
     September 30,
2006
  

Net interest income (Tax-equivalent)

    $ 837     773     709  

Fee and other income

      21     1,505     998  

Total revenue (Tax-equivalent)

      819     2,243     1,676  

Provision for credit losses

      1     (2 )   (4 )

Noninterest expense

      655     1,068     840  

Segment earnings

    $ 105     746     533  

Cash overhead efficiency ratio (Tax-equivalent)

      79.75 %   47.64     50.09  

Average loans, net

    $ 82,942     76,718     70,901  

Average core deposits

      37,040     36,520     31,576  

Economic capital, average

    $ 9,897     8,927     7,921  

Corporate and Investment Bank

The Corporate and Investment Bank includes corporate lending, investment banking, and treasury and international trade finance. Third quarter 2007 results compared with the third quarter of 2006 included:

 

  •  

Earnings of $105 million, down $428 million, driven by the $1.3 billion effect of the market disruption, partially offset by improved principal investing results and strong advisory and underwriting fees.

 

  •  

The market valuation losses, net of applicable hedges, in the Corporate and Investment Bank of:

 

  •  

$488 million on commercial mortgage structured products;

 

  •  

$103 million on consumer mortgage structured products;

 

  •  

$438 million in collateralized debt obligations, collateralized loan obligations and other structured credit products; and

 

  •  

$272 million in leveraged finance net of fees.

 

  •  

Improved principal investing results largely related to a $270 million unrealized gain related to the sale of a minority interest in a fund of direct investments and strong advisory and underwriting fees largely from structured products, merger and acquisition advisory services, and equities underwriting.

 

  •  

18 percent growth in net interest income, reflecting growth in loans and in structured product warehouse balances related to the market disruption.

 

  •  

Core deposit growth in global money market deposits and commercial mortgage servicing, and loan growth primarily in real estate financial services, international and asset-based lending.

 

  •  

Lower noninterest expense due to decreased revenue-based incentives.

 

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WACHOVIA EARNS $1.69 BILLION, EPS OF 89 CENTS PER SHARE/page 6

 

Capital Management Highlights

 

     Three Months Ended

(In millions)

    September 30,
2007
     June 30,
2007
    September 30,
2006

Net interest income (Tax-equivalent)

    $ 271     264    253

Fee and other income

      1,408     1,502    1,217

Total revenue (Tax-equivalent)

      1,671     1,755    1,462

Provision for credit losses

      —       —      —  

Noninterest expense

      1,238     1,296    1,097

Segment earnings

    $ 275     291    232

Cash overhead efficiency ratio (Tax-equivalent)

      74.08 %   73.85    74.98

Average loans, net

    $ 2,142     1,663    1,235

Average core deposits

      31,489     31,221    30,114

Economic capital, average

    $ 1,560     1,615    1,412

Capital Management

Capital Management includes retail brokerage services and asset management. The third quarter of 2007 compared with the third quarter of 2006 included:

 

  •  

Earnings of $275 million on revenue momentum driven by increased managed account fees and other asset-based fees, as well as solid retail brokerage transaction activity. Managed assets grew 22 percent to $157.7 billion.

 

  •  

16 percent growth in fee income, driven primarily by increased retail brokerage managed account fees and solid transaction activity, as well as the effect of acquisitions including European Credit Management Ltd. (ECM), a London-based fixed income investment management firm acquired on January 31, 2007. Growth was partially offset by a $40 million valuation loss related to the purchase of certain asset-backed commercial paper investments from Evergreen money market funds.

 

  •  

13 percent growth in noninterest expense primarily due to higher commissions and incentives and the acquisition impact, partially offset by merger efficiencies related to the 2006 acquisition of a 401(k) record-keeping business.

Total assets under management of $285.4 billion at September 30, 2007, were up from December 31, 2006, including $26.2 billion from the ECM acquisition, $7.2 billion in net inflows and approximately $7.6 billion in market appreciation, offset by a $34.5 billion change in investment discretion responsibility on previously co-managed, nonproprietary assets now solely managed by Wealth Management. Total brokerage client assets grew 6 percent from year-end 2006 to $807.2 billion.

***

Wachovia Corporation (NYSE:WB) is one of the nation’s largest diversified financial services companies, with assets of $754.2 billion and market capitalization of $95.3 billion at September 30, 2007. Wachovia provides a broad range of retail banking and brokerage, asset and wealth management, and corporate and investment banking products and services to 13 million household and business customers. Wachovia has 3,400 retail financial centers in 21 states from Connecticut to Florida and west to Texas and California, and nationwide retail brokerage, mortgage lending and auto finance businesses. Globally, clients are served in selected corporate and institutional sectors and through more than 40 international offices. Our retail brokerage operations under the Wachovia Securities brand name manage more than $800 billion in client assets through 11,400 registered representatives in 786 offices nationwide. The acquisition of A.G. Edwards, Inc., following the end of the third quarter, added approximately 740 offices, 6,300 financial consultants and $384 billion in brokerage client assets. Online banking is available at wachovia.com; online brokerage products and services at wachoviasec.com; and investment products and services at evergreeninvestments.com.

 

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WACHOVIA EARNS $1.69 BILLION, EPS OF 89 CENTS PER SHARE/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 October 19, 2007.

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 Discontinued Operations” and “Earnings Excluding Merger-Related and Restructuring Expenses, Other Intangible Amortization and Discontinued Operations”, and which are reconciled to GAAP financial measures on pages 22 and 23. In addition, in this news release certain designated net interest income amounts are presented on a tax-equivalent basis, including the calculation of the overhead efficiency ratio.

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

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

Earnings Conference Call and Supplemental Materials

Wachovia CEO Ken Thompson and CFO Tom Wurtz will review Wachovia’s third quarter 2007 results in a conference call and audio webcast beginning at 10 a.m. Eastern Time today. This review may include a discussion of certain non-GAAP financial measures. Supplemental materials relating to third 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 Third 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 888-357-9787 for U.S. callers or 706-679-7342 for international callers. You will be asked to tell the answering coordinator your name and the name of your firm. Mention the conference Access Code: WB Investor.

Replay: Friday, October 19, at 2:30 p.m. and continuing through 5 p.m. Friday, January 11. Replay telephone number is 706-645-9291; access code: 12547240.

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

 

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WACHOVIA CORPORATION AND SUBSIDIARIES

FINANCIAL TABLES

TABLE OF CONTENTS

 

     PAGE

Financial Highlights—Five Quarters Ended September 30, 2007

    9

Other Financial Data—Five Quarters Ended September 30, 2007

    10

Consolidated Statements of Income—Five Quarters Ended September 30, 2007

    11

Consolidated Statements of Income—Nine Months Ended September 30, 2007 and 2006

    12

Business Segments—Three Months Ended September 30, 2007 and June 30, 2007

    13

Business Segments—Three Months Ended September 30, 2006

    14

Loans—On-Balance Sheet, and Managed and Servicing Portfolios—Five Quarters Ended September 30, 2007

    15

Allowance for Credit Losses—Five Quarters Ended September 30, 2007

    16

Nonperforming Assets—Five Quarters Ended September 30, 2007

    17

Consolidated Balance Sheets—Five Quarters Ended September 30, 2007

    18

Net Interest Income Summaries—Five Quarters Ended September 30, 2007

    19 - 20

Net Interest Income Summaries—Nine Months Ended September 30, 2007 and 2006

    21

Reconciliation of Certain Non-GAAP Financial Measures—Five Quarters Ended September 30, 2007

    22 - 23

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PAGE 9

WACHOVIA CORPORATION AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS

(Unaudited)

 

     2007
     2006

(Dollars in millions, except per share data)                

    Third
Quarter
     Second
Quarter
    First
Quarter
     Fourth
Quarter
    Third
Quarter

EARNINGS SUMMARY

                             

Net interest income (GAAP)

    $ 4,551     4,449    4,500     4,577    3,541

Tax-equivalent adjustment

      33     38    37     35    37
    
 
  
 
  

Net interest income (Tax-equivalent)

      4,584     4,487    4,537     4,612    3,578

Fee and other income

      2,761     4,206    3,701     3,980    3,465
    
 
  
 
  

Total revenue (Tax-equivalent)

      7,345     8,693    8,238     8,592    7,043

Provision for credit losses

      408     179    177     206    108

Other noninterest expense

      4,246     4,721    4,460     4,741    3,915

Merger-related and restructuring expenses

      36     32    10     49    38

Other intangible amortization

      92     103    118     141    92
    
 
  
 
  

Total noninterest expense

      4,374     4,856    4,588     4,931    4,045

Minority interest in income of consolidated subsidiaries

      189     139    136     125    104
    
 
  
 
  

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

      2,374     3,519    3,337     3,330    2,786

Income taxes

      651     1,140    998     1,040    872

Tax-equivalent adjustment

      33     38    37     35    37
    
 
  
 
  

Income from continuing operations

      1,690     2,341    2,302     2,255    1,877

Discontinued operations, net of income taxes

      —       —      —       46    —  
    
 
  
 
  

Net income

    $ 1,690     2,341    2,302     2,301    1,877
    
 
  
 
  

Diluted earnings per common share

    $ 0.89     1.22    1.20     1.20    1.17

Return on average common stockholders’ equity

      9.60 %   13.54    13.47     13.09    14.85

Return on average assets

      0.92     1.33    1.35     1.31    1.34

Overhead efficiency ratio

      59.55 %   55.85    55.70     57.38    57.44

Operating leverage

    $ (868 )   189    (13 )   665    1
    
 
  
 
  

ASSET QUALITY

                             

Allowance for loan losses as % of loans, net

      0.78 %   0.79    0.80     0.80    1.03

Allowance for loan losses as % of nonperforming assets

      120     164    194     246    396

Allowance for credit losses as % of loans, net

      0.82     0.83    0.84     0.84    1.09

Net charge-offs as % of average loans, net

      0.19     0.14    0.15     0.14    0.16

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

      0.63 %   0.47    0.40     0.32    0.26
    
 
  
 
  

CAPITAL ADEQUACY (a)

                             

Tier I capital ratio

      7.2 %   7.5    7.4     7.4    7.7

Total capital ratio

      11.0     11.5    11.4     11.3    11.5

Leverage ratio

      6.1 %   6.2    6.1     6.0    6.6
    
 
  
 
  

OTHER DATA

                             

Average diluted common shares (In millions)

      1,910     1,919    1,925     1,922    1,600

Actual common shares (In millions)

      1,901     1,903    1,913     1,904    1,581

Dividends paid per common share

    $ 0.64     0.56    0.56     0.56    0.56

Dividend payout ratio on common shares

      71.91 %   45.90    46.67     46.67    47.86

Book value per common share

    $ 36.94     36.40    36.47     36.61    32.37

Common stock price

      50.15     51.25    55.05     56.95    55.80

Market capitalization

    $ 95,326     97,530    105,330     108,443    88,231

Common stock price to book value

      136 %   141    151     156    172

FTE employees

      109,724     110,493    110,369     109,460    97,060

Total financial centers/brokerage offices

      4,167     4,135    4,167     4,126    3,870

ATMs

      5,123     5,099    5,146     5,212    5,163
    
 
  
 
  
(a) The third quarter of 2007 is based on estimates.

Table of Contents

PAGE 10

WACHOVIA CORPORATION AND SUBSIDIARIES

OTHER FINANCIAL DATA

(Unaudited)

 

     2007
     2006

(In millions)            

    Third
Quarter
     Second
Quarter
    First
Quarter
     Fourth
Quarter
    Third
Quarter

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

                             

Return on average common stockholders’ equity

      9.72 %   13.66    13.50     12.98    15.02

Return on average assets

      0.93     1.34    1.35     1.30    1.36

Overhead efficiency ratio

      59.07     55.48    55.57     56.81    56.90

Overhead efficiency ratio excluding brokerage

      55.93 %   51.79    52.39     53.61    53.42

Operating leverage

    $ (864 )   210    (51 )   675    16
    
 
  
 
  

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

                             

Dividend payout ratio on common shares

      68.82 %   44.09    45.16     45.16    45.53

Return on average tangible common stockholders’ equity

      23.67     33.57    33.27     31.58    30.79

Return on average tangible assets

      1.02     1.47    1.49     1.43    1.47

Overhead efficiency ratio

      57.83     54.29    54.15     55.17    55.60

Overhead efficiency ratio excluding brokerage

      54.39 %   50.37    50.67     51.67    51.85

Operating leverage

    $ (876 )   197    (75 )   725    8
    
 
  
 
  

OTHER FINANCIAL DATA

                             

Net interest margin

      2.92 %   2.94    3.04     3.09    3.03

Fee and other income as % of total revenue

      37.59     48.38    44.93     46.32    49.20

Effective income tax rate (d)

      27.80     32.78    30.22     31.74    31.71

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

      28.80 %   33.51    30.99     32.46    32.61
    
 
  
 
  

AVERAGE BALANCE SHEET DATA

                             

Commercial loans, net

    $ 174,672     165,512    157,288     154,306    150,566

Consumer loans, net

      255,129     255,745    257,973     258,255    130,544

Loans, net

      429,801     421,257    415,261     412,561    281,110

Earning assets

      628,773     605,978    593,663     596,893    472,139

Total assets

      729,004     704,773    691,029     698,687    555,164

Core deposits

      379,009     378,496    369,270     362,427    291,227

Total deposits

      416,107     408,418    399,106     395,380    326,360

Interest-bearing liabilities

      574,399     547,669    535,778     536,958    414,563

Stockholders’ equity

    $ 69,857     69,317    69,320     69,725    50,143
    
 
  
 
  

PERIOD-END BALANCE SHEET DATA

                             

Commercial loans, net

    $ 189,545     175,369    167,039     162,098    159,424

Consumer loans, net

      259,661     253,751    254,624     258,060    131,335

Loans, net

      449,206     429,120    421,663     420,158    290,759

Goodwill and other intangible assets

                             

Goodwill

      38,848     38,766    38,838     38,379    23,535

Deposit base

      670     727    796     883    577

Customer relationships

      620     651    684     662    688

Tradename

      90     90    90     90    90

Total assets

      754,168     715,428    702,669     707,121    559,922

Core deposits

      377,865     378,188    377,358     371,771    291,667

Total deposits

      421,937     410,030    405,270     407,458    323,298

Stockholders’ equity

    $ 70,212     69,266    69,786     69,716    51,180
    
 
  
 
  
(a) These financial measures are calculated by excluding from GAAP net income presented on page 9, $22 million, $20 million, $6 million, $29 million and $25 million in the third, second and first quarters of 2007, and in the fourth and third quarters of 2006, respectively, of after-tax net merger-related and restructuring expenses, and $46 million after tax in the fourth quarter of 2006 related to discontinued operations.
(b) See page 9 for the most directly comparable GAAP financial measure and pages 22 and 23 for a more detailed reconciliation.
(c) These financial measures are calculated by excluding from GAAP net income presented on page 9, $60 million, $66 million, $76 million, $90 million and $59 million in the third, second and first quarters of 2007, and in the fourth and third quarters of 2006, respectively, of deposit base and other intangible amortization.
(d) The fourth quarter of 2006 includes taxes on discontinued operations.
(e) The tax-equivalent tax rate applies to fully tax-equivalized revenues.

Table of Contents

PAGE 11

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     2007
    2006

(In millions, except per share data)                    

    Third
Quarter
     Second
Quarter
    First
Quarter
    Fourth
Quarter
    Third
Quarter

INTEREST INCOME

                            

Interest and fees on loans

    $ 7,937     7,723    7,618    7,736    5,096

Interest and dividends on securities

      1,529     1,474    1,478    1,491    1,692

Trading account interest

      566     506    433    462    401

Other interest income

      799     647    611    681    595
    
 
  
  
  

Total interest income

      10,831     10,350    10,140    10,370    7,784
    
 
  
  
  

INTEREST EXPENSE

                            

Interest on deposits

      3,334     3,180    3,014    3,067    2,238

Interest on short-term borrowings

      801     706    669    781    860

Interest on long-term debt

      2,145     2,015    1,957    1,945    1,145
    
 
  
  
  

Total interest expense

      6,280     5,901    5,640    5,793    4,243
    
 
  
  
  

Net interest income

      4,551     4,449    4,500    4,577    3,541

Provision for credit losses

      408     179    177    206    108
    
 
  
  
  

Net interest income after provision for credit losses

      4,143     4,270    4,323    4,371    3,433
    
 
  
  
  

FEE AND OTHER INCOME

                            

Service charges

      689     667    614    646    638

Other banking fees

      437     504    416    452    427

Commissions

      600     649    659    633    562

Fiduciary and asset management fees

      993     981    920    856    823

Advisory, underwriting and other investment banking fees

      393     454    407    433    292

Trading account profits (losses)

      (437 )   195    128    29    123

Principal investing

      372     298    48    142    91

Securities gains (losses)

      (34 )   23    53    47    94

Other income

      (252 )   435    456    742    415
    
 
  
  
  

Total fee and other income

      2,761     4,206    3,701    3,980    3,465
    
 
  
  
  

NONINTEREST EXPENSE

                            

Salaries and employee benefits

      2,628     3,122    2,972    3,023    2,531

Occupancy

      325     331    312    323    284

Equipment

      283     309    307    314    291

Advertising

      62     70    61    47    54

Communications and supplies

      175     180    173    166    158

Professional and consulting fees

      196     209    177    239    200

Other intangible amortization

      92     103    118    141    92

Merger-related and restructuring expenses

      36     32    10    49    38

Sundry expense

      577     500    458    629    397
    
 
  
  
  

Total noninterest expense

      4,374     4,856    4,588    4,931    4,045
    
 
  
  
  

Minority interest in income of consolidated subsidiaries

      189     139    136    125    104
    
 
  
  
  

Income from continuing operations before income taxes

      2,341     3,481    3,300    3,295    2,749

Income taxes

      651     1,140    998    1,040    872
    
 
  
  
  

Income from continuing operations

      1,690     2,341    2,302    2,255    1,877

Discontinued operations, net of income taxes

      —       —      —      46    —  
    
 
  
  
  

Net income

    $ 1,690     2,341    2,302    2,301    1,877
    
 
  
  
  

PER COMMON SHARE DATA

                            

Basic earnings

                            

Income from continuing operations

    $ 0.90     1.24    1.22    1.20    1.19

Net income

      0.90     1.24    1.22    1.22    1.19

Diluted earnings

                            

Income from continuing operations

      0.89     1.22    1.20    1.18    1.17

Net income

      0.89     1.22    1.20    1.20    1.17

Cash dividends

    $ 0.64     0.56    0.56    0.56    0.56

AVERAGE COMMON SHARES

                            

Basic

      1,885     1,891    1,894    1,889    1,573

Diluted

      1,910     1,919    1,925    1,922    1,600
    
 
  
  
  

Table of Contents

PAGE 12

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Nine Months Ended
September 30,

(In millions, except per share data)                    

    2007
     2006

INTEREST INCOME

             

Interest and fees on loans

    $ 23,278     14,240

Interest and dividends on securities

      4,481     4,942

Trading account interest

      1,505     1,113

Other interest income

      2,057     1,600
    
 

Total interest income

      31,321     21,895
    
 

INTEREST EXPENSE

             

Interest on deposits

      9,528     6,052

Interest on short-term borrowings

      2,176     2,333

Interest on long-term debt

      6,117     2,838
    
 

Total interest expense

      17,821     11,223
    
 

Net interest income

      13,500     10,672

Provision for credit losses

      764     228
    
 

Net interest income after provision for credit losses

      12,736     10,444
    
 

FEE AND OTHER INCOME

             

Service charges

      1,970     1,834

Other banking fees

      1,357     1,304

Commissions

      1,908     1,773

Fiduciary and asset management fees

      2,894     2,392

Advisory, underwriting and other investment banking fees

      1,254     912

Trading account profits (losses)

      (114 )   506

Principal investing

      718     383

Securities gains

      42     71

Other income

      639     1,390
    
 

Total fee and other income

      10,668     10,565
    
 

NONINTEREST EXPENSE

             

Salaries and employee benefits

      8,722     7,880

Occupancy

      968     850

Equipment

      899     870

Advertising

      193     157

Communications and supplies

      528     487

Professional and consulting fees

      582     551

Other intangible amortization

      313     282

Merger-related and restructuring expenses

      78     130

Sundry expense

      1,535     1,338
    
 

Total noninterest expense

      13,818     12,545
    
 

Minority interest in income of consolidated subsidiaries

      464     289
    
 

Income before income taxes

      9,122     8,175

Income taxes

      2,789     2,685
    
 

Net income

    $ 6,333     5,490
    
 

PER COMMON SHARE DATA

             

Basic earnings

    $ 3.35     3.49

Diluted earnings

      3.30     3.43

Cash dividends

    $ 1.76     1.58

AVERAGE COMMON SHARES

             

Basic

      1,890     1,571

Diluted

      1,918     1,600
    
 

Table of Contents

PAGE 13

WACHOVIA CORPORATION AND SUBSIDIARIES

BUSINESS SEGMENTS

(Unaudited)

 

     Three Months Ended September 30, 2007

(In millions)            

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

CONSOLIDATED

                                         

Net interest income (a)

    $ 3,486    183    837     271     (193 )   (33 )   4,551

Fee and other income

      969    185    21     1,408     178     —       2,761

Intersegment revenue

      45    4    (39 )   (8 )   (2 )   —       —  
    
  
  
 
 
 
 

Total revenue (a)

      4,500    372    819     1,671     (17 )   (33 )   7,312

Provision for credit losses

      214    6    1     —       187     —       408

Noninterest expense

      2,015    252    655     1,238     178     36     4,374

Minority interest

      —      —      —       —       189     —       189

Income taxes (benefits)

      817    42    49     158     (401 )   (14 )   651

Tax-equivalent adjustment

      11    —      9     —       13     (33 )   —  
    
  
  
 
 
 
 

Net income (loss)

    $ 1,443    72    105     275     (183 )   (22 )   1,690
    
  
  
 
 
 
 
     Three Months Ended June 30, 2007

(In millions)            

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

CONSOLIDATED

                                         

Net interest income (a)

    $ 3,397    181    773     264     (128 )   (38 )   4,449

Fee and other income

      969    202    1,505     1,502     28     —       4,206

Intersegment revenue

      41    3    (35 )   (11 )   2     —       —  
    
  
  
 
 
 
 

Total revenue (a)

      4,407    386    2,243     1,755     (98 )   (38 )   8,655

Provision for credit losses

      160    2    (2 )   —       19     —       179

Noninterest expense

      2,035    255    1,068     1,296     170     32     4,856

Minority interest

      —      —      —       —       139     —       139

Income taxes (benefits)

      797    47    420     168     (280 )   (12 )   1,140

Tax-equivalent adjustment

      10    —      11     —       17     (38 )   —  
    
  
  
 
 
 
 

Net income (loss)

    $ 1,405    82    746     291     (163 )   (20 )   2,341
    
  
  
 
 
 
 

Table of Contents

PAGE 14

WACHOVIA CORPORATION AND SUBSIDIARIES

BUSINESS SEGMENTS

(Unaudited)

 

     Three Months Ended September 30, 2006

(In millions)        

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

CONSOLIDATED

                                         

Net interest income (a)

    $ 2,529    176    709     253     (89 )   (37 )   3,541

Fee and other income

      886    197    998     1,217     167     —       3,465

Intersegment revenue

      36    3    (31 )   (8 )   —       —       —  
    
  
  
 
 
 
 

Total revenue (a)

      3,451    376    1,676     1,462     78     (37 )   7,006

Provision for credit losses

      120    2    (4 )   —       (10 )   —       108

Noninterest expense

      1,621    249    840     1,097     200     38     4,045

Minority interest

      —      —      —       —       104     —       104

Income taxes (benefits)

      614    46    298     133     (206 )   (13 )   872

Tax-equivalent adjustment

      10    —      9     —       18     (37 )   —  
    
  
  
 
 
 
 

Net income (loss)

    $ 1,086    79    533     232     (28 )   (25 )   1,877
    
  
  
 
 
 
 
(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.

Table of Contents

PAGE 15

WACHOVIA CORPORATION AND SUBSIDIARIES

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

(Unaudited)

 

     2007
     2006
  

(In millions)         

    Third
Quarter
     Second
Quarter
     First
Quarter
     Fourth
Quarter
     Third
Quarter
  

ON-BALANCE SHEET LOAN PORTFOLIO

COMMERCIAL

                                 

Commercial, financial and agricultural

    $ 109,269     102,397     99,687     96,285     95,281  

Real estate—construction and other

      18,167     17,449     16,965     16,182     16,067  

Real estate—mortgage

      21,514     20,448     20,130     20,026     19,455  

Lease financing

      23,966     24,083     24,053     25,341     25,253  

Foreign

      26,471     20,959     16,240     13,464     12,677  
    
 
 
 
 

Total commercial

      199,387     185,336     177,075     171,298     168,733  
    
 
 
 
 

CONSUMER

                                 

Real estate secured

      225,355     220,293     220,682     225,826     100,115  

Student loans

      7,742     6,757     8,479     7,768     9,175  

Installment loans

      24,763     25,017     23,665     22,660     21,454  
    
 
 
 
 

Total consumer

      257,860     252,067     252,826     256,254     130,744  
    
 
 
 
 

Total loans

      457,247     437,403     429,901     427,552     299,477  

Unearned income

      (8,041 )   (8,283 )   (8,238 )   (7,394 )   (8,718 )
    
 
 
 
 

Loans, net (On-balance sheet)

    $ 449,206     429,120     421,663     420,158     290,759  
    
 
 
 
 

MANAGED PORTFOLIO (a)

                                 

COMMERCIAL

                                 

On-balance sheet loan portfolio

    $ 199,387     185,336     177,075     171,298     168,733  

Securitized loans—off-balance sheet

      142     170     181     194     218  

Loans held for sale

      13,905     11,573     10,467     8,866     5,556  
    
 
 
 
 

Total commercial

      213,434     197,079     187,723     180,358     174,507  
    
 
 
 
 

CONSUMER

                                 

Real estate secured

                                 

On-balance sheet loan portfolio

      225,355     220,293     220,682     225,826     100,115  

Securitized loans—off-balance sheet

      7,625     8,112     6,595     5,611     6,151  

Securitized loans included in securities

      5,963     6,091     5,629     5,321     4,317  

Loans held for sale

      3,583     4,079     4,089     3,420     3,324  
    
 
 
 
 

Total real estate secured

      242,526     238,575     236,995     240,178     113,907  
    
 
 
 
 

Student

                                 

On-balance sheet loan portfolio

      7,742     6,757     8,479     7,768     9,175  

Securitized loans—off-balance sheet

      2,856     2,905     3,045     3,128     3,218  

Securitized loans included in securities

      52     52     52     52     52  

Loans held for sale

      1,968     2,046     —       —       —    
    
 
 
 
 

Total student

      12,618     11,760     11,576     10,948     12,445  
    
 
 
 
 

Installment

                                 

On-balance sheet loan portfolio

      24,763     25,017     23,665     22,660     21,454  

Securitized loans—off-balance sheet

      2,572     3,105     2,851     3,276     3,695  

Securitized loans included in securities

      55     116     126     137     169  

Loans held for sale

      1,975     35     476     282     159  
    
 
 
 
 

Total installment

      29,365     28,273     27,118     26,355     25,477  
    
 
 
 
 

Total consumer

      284,509     278,608     275,689     277,481     151,829  
    
 
 
 
 

Total managed portfolio

    $ 497,943     475,687     463,412     457,839     326,336  
    
 
 
 
 

SERVICING PORTFOLIO (b)

                                 

Commercial

    $ 337,721     298,374     271,038     250,652     227,899  

Consumer

    $ 28,474     26,789     25,952     21,039     60,854  
    
 
 
 
 
(a) The managed portfolio includes the on-balance sheet loan portfolio, loans securitized for which the retained interests are classified in securities on-balance sheet, loans held for sale on-balance sheet and the off-balance sheet portfolio of securitized loans sold, where we service the loans.
(b) The servicing portfolio consists of third party commercial and consumer loans for which our sole function is that of servicing the loans for the third parties.

Table of Contents

PAGE 16

WACHOVIA CORPORATION AND SUBSIDIARIES

ALLOWANCE FOR CREDIT LOSSES

(Unaudited)

 

     2007
     2006
  

(In millions)        

    Third
Quarter
     Second
Quarter
     First
Quarter
     Fourth
Quarter
     Third
Quarter
  

ALLOWANCE FOR CREDIT LOSSES (a)

                                 

Balance, beginning of period

    $ 3,552     3,533     3,514     3,163     3,186  

Provision for credit losses

      381     168     175     204     118  

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

      3     4     1     7     (4 )

Provision for credit losses for unfunded lending commitments

      24     7     1     (5 )   (6 )

LOAN LOSSES

                                 

Commercial, financial and agricultural

      (41 )   (39 )   (34 )   (32 )   (25 )

Commercial real estate—construction and mortgage

      (5 )   (4 )   (6 )   (10 )   (2 )
    
 
 
 
 

Total commercial

      (46 )   (43 )   (40 )   (42 )   (27 )
    
 
 
 
 

Real estate secured

      (59 )   (40 )   (33 )   (29 )   (25 )

Student loans

      (5 )   (2 )   (3 )   (5 )   (5 )

Installment and other loans (b)

      (168 )   (138 )   (142 )   (135 )   (119 )
    
 
 
 
 

Total consumer

      (232 )   (180 )   (178 )   (169 )   (149 )
    
 
 
 
 

Total loan losses

      (278 )   (223 )   (218 )   (211 )   (176 )
    
 
 
 
 

LOAN RECOVERIES

                                 

Commercial, financial and agricultural

      9     15     9     27     14  

Commercial real estate—construction and mortgage

      3     —       3     1     1  
    
 
 
 
 

Total commercial

      12     15     12     28     15  
    
 
 
 
 

Real estate secured

      12     11     6     7     9  

Student loans

      3     —       1     3     1  

Installment and other loans (b)

      45     47     44     33     35  
    
 
 
 
 

Total consumer

      60     58     51     43     45  
    
 
 
 
 

Total loan recoveries

      72     73     63     71     60  
    
 
 
 
 

Net charge-offs

      (206 )   (150 )   (155 )   (140 )   (116 )
    
 
 
 
 

Balance of acquired entities at purchase date

      —       —       —       303     —    

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

      (63 )   (10 )   (3 )   (18 )   (15 )
    
 
 
 
 

Balance, end of period

    $ 3,691     3,552     3,533     3,514     3,163  
    
 
 
 
 

ALLOWANCE FOR CREDIT LOSSES

                                 

Allowance for loan losses

    $ 3,505     3,390     3,378     3,360     3,004  

Reserve for unfunded lending commitments

      186     162     155     154     159  
    
 
 
 
 

Total allowance for credit losses

    $ 3,691     3,552     3,533     3,514     3,163  
    
 
 
 
 

ALLOWANCE FOR LOAN LOSSES

                                 

as % of loans, net

      0.78 %   0.79     0.80     0.80     1.03  

as % of nonaccrual and restructured loans (c) (d)

      135     182     213     272     520  

as % of nonperforming assets (c)

      120     164     194     246     396  

ALLOWANCE FOR CREDIT LOSSES

                                 

as% of loans, net

     0.82 %   0.83     0.84     0.84     1.09  
    
 
 
 
 

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

                                 

Commercial, financial and agricultural

      0.10 %   0.07     0.08     0.02     0.04  

Commercial real estate—construction and mortgage

      0.02     0.04     0.04     0.10     0.02  
    
 
 
 
 

Total commercial

      0.08     0.07     0.07     0.04     0.03  
    
 
 
 
 

Real estate secured

      0.08     0.05     0.05     0.04     0.06  

Student loans

      0.14     0.07     0.10     0.09     0.14  

Installment and other loans (b)

      1.99     1.47     1.67     1.79     1.58  
    
 
 
 
 

Total consumer

      0.27     0.19     0.20     0.19     0.32  
    
 
 
 
 

Total as % of average loans, net

      0.19 %   0.14     0.15     0.14     0.16  
    
 
 
 
 

CONSUMER REAL ESTATE SECURED NET CHARGE-OFFS

                                 

First lien

    $ (32 )   (17 )   (15 )   (15 )   (10 )

Second lien

      (15 )   (12 )   (12 )   (7 )   (6 )
    
 
 
 
 

Total consumer real estate secured net charge-offs

    $ (47 )   (29 )   (27 )   (22 )   (16 )
    
 
 
 
 
(a) The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments.
(b) Principally auto loans.
(c) These ratios do not include nonperforming assets included in loans held for sale.
(d) Restructured loans are not significant.
(e) Annualized.

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PAGE 17

WACHOVIA CORPORATION AND SUBSIDIARIES

NONPERFORMING ASSETS

(Unaudited)

 

     2007
    2006

(In millions)        

    Third
Quarter
     Second
Quarter
    First
Quarter
    Fourth
Quarter
    Third
Quarter

NONPERFORMING ASSETS

                            

Nonaccrual loans

                            

Commercial

                            

Commercial, financial and agricultural

    $ 354     318    303    226    275

Commercial real estate—construction and mortgage

      289     161    117    93    80
    
 
  
  
  

Total commercial

      643     479    420    319    355
    
 
  
  
  

Consumer

                            

Real estate secured

                            

First lien

      1,865     1,293    1,076    868    183

Second lien

      41     43    37    32    30

Installment and other loans (a)

      45     42    51    15    10
    
 
  
  
  

Total consumer

      1,951     1,378    1,164    915    223
    
 
  
  
  

Total nonaccrual loans

      2,594     1,857    1,584    1,234    578
    
 
  
  
  

Foreclosed properties (b)

      334     207    155    132    181
    
 
  
  
  

Total nonperforming assets

    $ 2,928     2,064    1,739    1,366    759
    
 
  
  
  

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

      0.65 %   0.48    0.41    0.32    0.26
    
 
  
  
  

Nonperforming assets included in loans held for sale

                            

Commercial

    $ —       —      1    1    9

Consumer

      59     42    25    15    14
    
 
  
  
  

Total nonperforming assets included in loans held for sale

      59     42    26    16    23
    
 
  
  
  

Nonperforming assets included in loans and in loans held for sale

    $ 2,987     2,106    1,765    1,382    782
    
 
  
  
  

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

      0.63 %   0.47    0.40    0.32    0.26
    
 
  
  
  

PAST DUE LOANS 90 DAYS AND OVER, AND NONACCRUAL LOANS

                            

Accruing loans past due 90 days and over

    $ 590     562    555    650    666

Nonaccrual loans

      2,594     1,857    1,584    1,234    578
    
 
  
  
  

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

    $ 3,184     2,419    2,139    1,884    1,244
    
 
  
  
  

Commercial as % of loans, net

      0.38 %   0.31    0.28    0.23    0.28

Consumer as % of loans, net

      0.95 %   0.74    0.66    0.59    0.61
    
 
  
  
  
(a) Principally auto loans; nonaccrual status does not apply to student loans.
(b) Restructured loans are not significant.
(c) These ratios do not include nonperforming assets included in loans held for sale.
(d) These ratios reflect nonperforming loans included in loans held for sale. Loans held for sale are recorded at the lower of cost or market value, and accordingly, the amounts shown and included in the ratios are net of the transferred allowance for loan losses and the lower of cost or market value adjustments.

Table of Contents

PAGE 18

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     2007
     2006
  

(In millions, except per share data)                    

    Third
Quarter
     Second
Quarter
     First
Quarter
     Fourth
Quarter
     Third
Quarter
  

ASSETS

                                 

Cash and due from banks

    $ 12,681     12,065     12,593     15,826     11,850  

Interest-bearing bank balances

      4,449     2,726     2,591     2,167     5,270  

Federal funds sold and securities purchased under resale agreements

      11,995     11,511     10,322     16,923     18,497  
    
 
 
 
 

Total cash and cash equivalents

      29,125     26,302     25,506     34,916     35,617  
    
 
 
 
 

Trading account assets

      53,969     49,969     47,875     45,529     43,904  

Securities

      111,827     106,184     106,841     108,619     106,553  

Loans, net of unearned income

      449,206     429,120     421,663     420,158     290,759  

Allowance for loan losses

      (3,505 )   (3,390 )   (3,378 )   (3,360 )   (3,004 )
    
 
 
 
 

Loans, net

      445,701     425,730     418,285     416,798     287,755  
    
 
 
 
 

Loans held for sale

      21,431     17,733     15,032     12,568     9,039  

Premises and equipment

      6,002     6,080     6,058     6,141     5,536  

Due from customers on acceptances

      1,295     831     992     855     1,200  

Goodwill

      38,848     38,766     38,838     38,379     23,535  

Other intangible assets

      1,380     1,468     1,570     1,635     1,355  

Other assets

      44,590     42,365     41,672     41,681     45,428  
    
 
 
 
 

Total assets

    $ 754,168     715,428     702,669     707,121     559,922  
    
 
 
 
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                 

Deposits

                                 

Noninterest-bearing deposits

      56,825     62,112     63,399     66,572     63,880  

Interest-bearing deposits

      365,112     347,918     341,871     340,886     259,418  
    
 
 
 
 

Total deposits

      421,937     410,030     405,270     407,458     323,298  

Short-term borrowings

      62,714     52,715     47,144     49,157     58,749  

Bank acceptances outstanding

      1,303     840     1,004     863     1,213  

Trading account liabilities

      17,771     19,319     17,291     18,228     19,553  

Other liabilities

      18,352     18,080     16,741     20,004     16,513  

Long-term debt

      158,584     142,047     142,334     138,594     86,419  
    
 
 
 
 

Total liabilities

      680,661     643,031     629,784     634,304     505,745  
    
 
 
 
 

Minority interest in net assets of consolidated subsidiaries

      3,295     3,131     3,099     3,101     2,997  
    
 
 
 
 

STOCKHOLDERS’ EQUITY

                                 

Dividend Equalization Preferred shares, no par value, 97 million shares issued and outstanding at September 30, 2007

      —       —       —       —       —    

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

      —       —       —       —       —    

Common stock, $3.33-1/3 par value; authorized 3 billion shares, outstanding 1.901 billion shares at September 30, 2007

      6,336     6,343     6,378     6,347     5,271  

Paid-in capital

      51,885     51,851     51,964     51,746     34,276  

Retained earnings

      14,742     14,335     13,378     13,723     12,696  

Accumulated other comprehensive income, net

      (2,751 )   (3,263 )   (1,934 )   (2,100 )   (1,063 )
    
 
 
 
 

Total stockholders’ equity

      70,212     69,266     69,786     69,716     51,180  
    
 
 
 
 

Total liabilities and stockholders’ equity

    $ 754,168     715,428     702,669     707,121     559,922  
    
 
 
 
 

Table of Contents

PAGE 19

WACHOVIA CORPORATION AND SUBSIDIARIES

NET INTEREST INCOME SUMMARIES

(Unaudited)

 

    THIRD QUARTER 2007
     SECOND QUARTER 2007
  

(In millions)        

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

ASSETS

                                    

Interest-bearing bank balances

   $ 6,459     93   5.68 %   $ 3,384     50   6.00 %

Federal funds sold and securities purchased under resale agreements

     14,206     194   5.42       12,110     158   5.25  

Trading account assets

     38,737     575   5.93       35,165     519   5.90  

Securities

     111,424     1,522   5.46       108,433     1,467   5.41  

Loans

                                    

Commercial

                                    

Commercial, financial and agricultural

     106,263     1,927   7.19       101,012     1,805   7.16  

Real estate—construction and other

     17,795     344   7.66       17,334     329   7.62  

Real estate—mortgage

     20,883     406   7.71       20,175     378   7.53  

Lease financing

     7,523     146   7.80       7,759     150   7.74  

Foreign

     22,208     308   5.53       19,232     265   5.51  
   
 
       
 
     

Total commercial

     174,672     3,131   7.12       165,512     2,927   7.09  
   
 
       
 
     

Consumer

                                    

Real estate secured

     223,356     4,070   7.28       222,096     4,042   7.28  

Student loans

     7,299     122   6.61       8,850     141   6.42  

Installment loans

     24,474     614   9.99       24,799     609   9.38  
   
 
       
 
     

Total consumer

     255,129     4,806   7.52       255,745     4,792   7.46  
   
 
       
 
     

Total loans

     429,801     7,937   7.36       421,257     7,719   7.31  
   
 
       
 
     

Loans held for sale

     20,209     363   7.14       17,644     285   6.47  

Other earning assets

     7,937     138   6.91       7,985     144   7.23  
   
 
       
 
     

Total earning assets excluding derivatives

     628,773     10,822   6.86       605,978     10,342   6.82  

Risk management derivatives (a)

     —       42   0.02       —       46   0.03  
   
 
       
 
     

Total earning assets including derivatives

     628,773     10,864   6.88       605,978     10,388   6.85  
         
 
       
 

Cash and due from banks

     11,134                 11,533            

Other assets

     89,097                 87,262            
   
             
           

Total assets

   $ 729,004               $ 704,773            
   
             
           

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                    

Interest-bearing deposits

                                    

Savings and NOW accounts

     81,851     357   1.73       83,977     367   1.75  

Money market accounts

     116,404     980   3.34       111,562     976   3.51  

Other consumer time

     122,474     1,507   4.88       120,684     1,455   4.84  

Foreign

     23,322     292   4.97       21,871     270   4.96  

Other time

     13,776     187   5.40       8,051     107   5.30  
   
 
       
 
     

Total interest-bearing deposits

     357,827     3,323   3.68       346,145     3,175   3.68  

Federal funds purchased and securities sold under repurchase

    agreements

     44,334     556   4.98       38,031     473   4.98  

Commercial paper

     5,799     65   4.42       5,143     60   4.67  

Securities sold short

     7,420     70   3.74       7,158     67   3.75  

Other short-term borrowings

     7,793     55   2.74       7,688     52   2.77  

Long-term debt

     151,226     2,067   5.44       143,504     1,923   5.37  
   
 
       
 
     

Total interest-bearing liabilities excluding derivatives

     574,399     6,136   4.24       547,669     5,750   4.21  

Risk management derivatives (a)

     —       144   0.10       —       151   0.11  
   
 
       
 
     

Total interest-bearing liabilities including derivatives

     574,399     6,280   4.34       547,669     5,901   4.32  
         
 
       
 

Noninterest-bearing deposits

     58,280                 62,273            

Other liabilities

     26,468                 25,514            

Stockholders’ equity

     69,857                 69,317            
   
             
           

Total liabilities and stockholders’ equity

   $ 729,004               $ 704,773            
   
             
           

Interest income and rate earned—including derivatives

         $ 10,864   6.88 %         $ 10,388   6.85 %

Interest expense and equivalent rate paid—including derivatives

           6,280   3.96             5,901   3.91  
         
 
       
 

Net interest income and margin—including derivatives

         $ 4,584   2.92 %         $ 4,487   2.94 %
         
 
       
 
(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.

Table of Contents

PAGE 20

WACHOVIA CORPORATION AND SUBSIDIARIES

NET INTEREST INCOME SUMMARIES

(Unaudited)

 

FIRST QUARTER 2007
     FOURTH QUARTER 2006
     THIRD QUARTER 2006
  
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
  
                                                         
$ 1,523      30    7.80 %   $ 3,596      54    5.95 %   $ 2,671      34    5.07 %
  14,124      177    5.07       20,830      268    5.11       17,530      224    5.08  
  29,681      442    5.97       31,069      469    6.03       31,160      409    5.24  
  108,071      1,461    5.42       108,543      1,467    5.40       122,152      1,661    5.44  
                                                         
                                                         
  98,413      1,736    7.16       96,359      1,726    7.10       93,886      1,673    7.07  
  16,508      313    7.69       16,091      311    7.67       15,787      308    7.74  
  20,231      380    7.61       19,830      380    7.61       19,507      378    7.69  
  7,730      150    7.75       9,674      166    6.88       9,731      172    7.04  
  14,406      196    5.49       12,352      170    5.49       11,655      158    5.37  
  
        
  
        
  
      
  157,288      2,775    7.15       154,306      2,753    7.08       150,566      2,689    7.09  
  
        
  
        
  
      
                                                         
  225,909      4,148    7.36       226,870      4,240    7.47       99,669      1,670    6.69  
  8,524      136    6.47       8,886      145    6.49       9,605      161    6.65  
  23,540      566    9.42       22,499      546    9.62       21,270      517    9.66  
  
        
  
        
  
      
  257,973      4,850    7.52       258,255      4,931    7.63       130,544      2,348    7.17  
  
        
  
        
  
      
  415,261      7,625    7.38       412,561      7,684    7.42       281,110      5,037    7.13  
  
        
  
        
  
      
  16,748      255    6.16       11,928      200    6.70       12,130      214    6.99  
  8,255      139    6.82       8,366      149    7.05       5,386      113    8.35  
  
        
  
        
  
      
  593,663      10,129    6.86       596,893      10,291    6.87       472,139      7,692    6.49  
  —        48    0.03       —        114    0.08       —        129    0.11  
  
        
  
        
  
      
  593,663      10,177    6.89       596,893      10,405    6.95       472,139      7,821    6.60  
      
  
        
  
        
  
  12,260                   12,418                   11,973              
  85,106                   89,376                   71,052              
               
               
             
$ 691,029                 $ 698,687                 $ 555,164              
               
               
             
                                                         
                                                         
  84,247      373    1.80       82,924      398    1.90       75,534      355    1.86  
  107,785      917    3.45       104,620      913    3.46       99,788      862    3.43  
  116,262      1,369    4.77       111,858      1,310    4.65       52,352      548    4.15  
  20,802      249    4.85       20,245      241    4.73       20,599      244    4.70  
  9,034      119    5.36       12,708      166    5.17       14,534      191    5.23  
  
        
  
        
  
      
  338,130      3,027    3.63       332,355      3,028    3.61       262,807      2,200    3.32  
  35,142      430    4.97       43,732      537    4.87       51,314      629    4.86  
  4,920      57    4.72       5,043      60    4.72       5,190      63    4.77  
  8,709      83    3.86       9,934      94    3.75       8,951      82    3.61  
  6,898      44    2.54       6,530      38    2.38       5,575      30    2.14  
  141,979      1,880    5.35       139,364      1,873    5.35       80,726      1,095    5.41  
  
        
  
        
  
      
  535,778      5,521    4.17       536,958      5,630    4.16       414,563      4,099    3.93  
  —        119    0.09       —        163    0.13       —        144    0.14  
  
        
  
        
  
      
  535,778      5,640    4.26       536,958      5,793    4.29       414,563      4,243    4.07  
      
  
        
  
        
  
  60,976                   63,025                   63,553              
  24,955                   28,979                   26,905              
  69,320                   69,725                   50,143              
               
               
             
$ 691,029                 $ 698,687                 $ 555,164              
               
               
             
       $ 10,177    6.89 %          $ 10,405    6.95 %          $ 7,821    6.60 %
         5,640    3.85              5,793    3.86              4,243    3.57  
      
  
        
  
        
  
       $ 4,537    3.04 %          $ 4,612    3.09 %          $ 3,578    3.03 %
      
  
        
  
        
  

Table of Contents

PAGE 21

WACHOVIA CORPORATION AND SUBSIDIARIES

NET INTEREST INCOME SUMMARIES

(Unaudited)

 

     NINE MONTHS ENDED
September 30, 2007
     NINE MONTHS ENDED
September 30, 2006
  

(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

    $ 3,807      173    6.06 %   $ 2,523      90    4.77 %

Federal funds sold and securities purchased under resale agreements

      13,480      529    5.25       18,264      642    4.70  

Trading account assets

      34,561      1,536    5.93       29,232      1,146    5.23  

Securities

      109,322      4,450    5.43       121,415      4,886    5.37  

Loans

                                         

Commercial

                                         

Commercial, financial and agricultural

      101,925      5,468    7.17       90,666      4,639    6.84  

Real estate—construction and other

      17,217      986    7.66       14,978      828    7.39  

Real estate—mortgage

      20,432      1,164    7.62       19,928      1,097    7.36  

Lease financing

      7,670      446    7.76       9,891      518    6.98  

Foreign

      18,644      769    5.51       11,026      418    5.06  
    
  
        
  
      

Total commercial

      165,888      8,833    7.12       146,489      7,500    6.84  
    
  
        
  
      

Consumer

                                         

Real estate secured

      223,778      12,260    7.31       97,722      4,768    6.51  

Student loans

      8,220      399    6.49       10,342      488    6.31  

Installment loans

      24,274      1,789    9.60       17,839      1,241    9.30  
    
  
        
  
      

Total consumer

      256,272      14,448    7.50       125,903      6,497    6.89  
    
  
        
  
      

Total loans

      422,160      23,281    7.35       272,392      13,997    6.86  
    
  
        
  
      

Loans held for sale

      18,213      903    6.62       9,922      507    6.82  

Other earning assets

      8,057      421    6.98       5,660      330    7.79  
    
  
        
  
      

Total earning assets excluding derivatives

      609,600      31,293    6.84       459,408      21,598    6.28  

Risk management derivatives (a)

      —        136    0.03       —        417    0.12  
    
  
        
  
      

Total earning assets including derivatives

      609,600      31,429    6.87       459,408      22,015    6.40  
           
  
        
  

Cash and due from banks

      11,638                   12,260              

Other assets

      87,170                   68,781              
    
               
             

Total assets

    $ 708,408                 $ 540,449              
    
               
             

LIABILITIES AND STOCKHOLDERS’ EQUITY

                                         

Interest-bearing deposits

                                         

Savings and NOW accounts

      83,350      1,097    1.76       77,937      991    1.70  

Money market accounts

      111,949      2,873    3.43       99,545      2,296    3.08  

Other consumer time

      119,828      4,331    4.83       49,038      1,420    3.87  

Foreign

      22,008      811    4.93       20,325      665    4.38  

Other time

      10,304      413    5.36       14,367      541    5.03  
    
  
        
  
      

Total interest-bearing deposits

      347,439      9,525    3.67       261,212      5,913    3.03  

Federal funds purchased and securities sold under repurchase agreements

      39,203      1,459    4.98       50,049      1,675    4.47  

Commercial paper

      5,290      182    4.60       4,684      155    4.41  

Securities sold short

      7,758      220    3.79       8,910      219    3.28  

Other short-term borrowings

      7,463      151    2.69       6,399      106    2.22  

Long-term debt

      145,604      5,870    5.39       69,591      2,732    5.24  
    
  
        
  
      

Total interest-bearing liabilities excluding derivatives

      552,757      17,407    4.21       400,845      10,800    3.60  

Risk management derivatives (a)

      —        414    0.10       —        423    0.14  
    
  
        
  
      

Total interest-bearing liabilities including derivatives

      552,757      17,821    4.31       400,845      11,223    3.74  
           
  
        
  

Noninterest-bearing deposits

      60,500                   64,510              

Other liabilities

      25,651                   26,042              

Stockholders’ equity

      69,500                   49,052              
    
               
             

Total liabilities and stockholders’ equity

    $ 708,408                 $ 540,449              
    
               
             

Interest income and rate earned—including derivatives

           $ 31,429    6.87 %          $ 22,015    6.40 %

Interest expense and equivalent rate paid—including derivatives

             17,821    3.90              11,223    3.27  
           
  
        
  

Net interest income and margin—including derivatives

           $ 13,608    2.97 %          $ 10,792    3.13 %
           
  
        
  
(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.

Table of Contents

PAGE 22

WACHOVIA CORPORATION AND SUBSIDIARIES

RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES

(Unaudited)

 

          2007
     2006
  

(In millions, except per share data)                    

    *
    Third
Quarter
     Second
Quarter
     First
Quarter
     Fourth
Quarter
     Third
Quarter
  

INCOME FROM CONTINUING OPERATIONS

                                      

Net income (GAAP)

    A    $ 1,690     2,341     2,302     2,301     1,877  

Discontinued operations, net of income taxes (GAAP)

           —       —       —       (46 )   —    
    
  
 
 
 
 

Income from continuing operations (GAAP)

          1,690     2,341     2,302     2,255     1,877  

Merger-related and restructuring expenses (GAAP)

           22     20     6     29     25  
    
  
 
 
 
 

Earnings excluding merger-related and restructuring expenses, and discontinued operations

    B      1,712     2,361     2,308     2,284     1,902  

Other intangible amortization (GAAP)

          60     66     76     90     59  
    
  
 
 
 
 

Earnings excluding merger-related and restructuring expenses, other intangible amortization and discontinued operations

    C    $ 1,772     2,427     2,384     2,374     1,961  
    
  
 
 
 
 

RETURN ON AVERAGE COMMON STOCKHOLDERS’ EQUITY

                                      

Average common stockholders’ equity (GAAP)

    D    $ 69,857     69,317     69,320     69,725     50,143  

Merger-related and restructuring expenses (GAAP)

           36     14     1     95     70  

Discontinued operations (GAAP)

           —       —       —       (8 )   —    
    
  
 
 
 
 

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

    E      69,893     69,331     69,321     69,812     50,213  

Average intangible assets (GAAP)

   F      (40,198 )   (40,328 )   (40,263 )   (39,979 )   (24,943 )
    
  
 
 
 
 

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

    G    $ 29,695     29,003     29,058     29,833     25,270  
    
  
 
 
 
 

Return on average common stockholders’ equity

                                      

GAAP

    A/D      9.60 %   13.54     13.47     13.09     14.85  

Excluding merger-related and restructuring expenses, and discontinued operations

    B/E      9.72     13.66     13.50     12.98     15.02  

Return on average tangible common stockholders’ equity

                                      

GAAP

    A/D+F      22.61     32.38     32.14     30.68     29.55  

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

    C/G      23.67 %   33.57     33.27     31.58     30.79  
    
  
 
 
 
 

RETURN ON AVERAGE ASSETS

                                      

Average assets (GAAP)

    H    $ 729,004     704,773     691,029     698,687     555,164  

Average intangible assets (GAAP)

          (40,198 )   (40,328 )   (40,263 )   (39,979 )   (24,943 )
    
  
 
 
 
 

Average tangible assets (GAAP)

    I      688,806     664,445     650,766     658,708     530,221  
    
  
 
 
 
 

Average assets (GAAP)

           729,004     704,773     691,029     698,687     555,164  

Merger-related and restructuring expenses (GAAP)

           36     14     1     95     70  

Discontinued operations (GAAP)

           —       —       —       (8 )   —    
    
  
 
 
 
 

Average assets, excluding merger-related and restructuring expenses, and discontinued operations

    J      729,040     704,787     691,030     698,774     555,234  

Average intangible assets (GAAP)

          (40,198 )   (40,328 )   (40,263 )   (39,979 )   (24,943 )
    
  
 
 
 
 

Average tangible assets, excluding merger-related and restructuring expenses, and discontinued operations

    K    $ 688,842     664,459     650,767     658,795     530,291  
    
  
 
 
 
 

Return on average assets

                                      

GAAP

    A/H      0.92 %   1.33     1.35     1.31     1.34  

Excluding merger-related and restructuring expenses, and discontinued operations

    B/J      0.93     1.34     1.35     1.30     1.36  

Return on average tangible assets

                                      

GAAP

    A/I      0.97     1.41     1.43     1.39     1.40  

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

    C/K      1.02 %   1.47     1.49     1.43     1.47  
    
  
 
 
 
 

Table of Contents

PAGE 23

WACHOVIA CORPORATION AND SUBSIDIARIES

RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES

(Unaudited)

 

          2007
     2006
  

(In millions, except per share data)                    

    *
    Third
Quarter
     Second
Quarter
     First
Quarter
     Fourth
Quarter
     Third
Quarter
  

OVERHEAD EFFICIENCY RATIOS

                                      

Noninterest expense (GAAP)

    L    $ 4,374     4,856     4,588     4,931     4,045  

Merger-related and restructuring expenses (GAAP)

           (36 )   (32 )   (10 )   (49 )   (38 )
    
  
 
 
 
 

Noninterest expense, excluding merger-related and restructuring expenses

    M      4,338     4,824     4,578     4,882     4,007  

Other intangible amortization (GAAP)

           (92 )   (103 )   (118 )   (141 )   (92 )
    
  
 
 
 
 

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

    N    $ 4,246     4,721     4,460     4,741     3,915  
    
  
 
 
 
 

Net interest income (GAAP)

         $ 4,551     4,449     4,500     4,577     3,541  

Tax-equivalent adjustment

           33     38     37     35     37  
    
  
 
 
 
 

Net interest income (Tax-equivalent)

          4,584     4,487     4,537     4,612     3,578  

Fee and other income (GAAP)

          2,761     4,206     3,701     3,980     3,465  
    
  
 
 
 
 

Total

   O    $ 7,345     8,693     8,238     8,592     7,043  
    
  
 
 
 
 

Retail Brokerage Services, excluding insurance

                                      

Noninterest expense (GAAP)

   P    $ 1,011     1,052     995     984     893  
    
  
 
 
 
 

Net interest income (GAAP)

         $ 257     251     252     249     246  

Tax-equivalent adjustment

          —       —       —       —       —    
    
  
 
 
 
 

Net interest income (Tax-equivalent)

          257     251     252     249     246  

Fee and other income (GAAP)

           1,139     1,161     1,146     1,073     970  
    
  
 
 
 
 

Total

   Q    $ 1,396     1,412     1,398     1,322     1,216  
    
  
 
 
 
 

Overhead efficiency ratios

                                      

GAAP

    L/O      59.55 %   55.85     55.70     57.38     57.44  

Excluding merger-related and restructuring expenses

    M/O      59.07     55.48     55.57     56.81     56.90  

Excluding merger-related and restructuring expenses, and brokerage

    M-P/O-Q      55.93     51.79     52.39     53.61     53.42  

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

    N/O      57.83     54.29     54.15     55.17     55.60  

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

   N-P/O-Q      54.39 %   50.37     50.67     51.67     51.85  
    
  
 
 
 
 

OPERATING LEVERAGE

                                      

Operating leverage (GAAP)

         $ (868 )   189     (13 )   665     1  

Merger-related and restructuring expenses (GAAP)

          4     21     (38 )   10     15  
    
  
 
 
 
 

Operating leverage, excluding merger-related and restructuring expenses

           (864 )   210     (51 )   675     16  

Other intangible amortization (GAAP)

           (12 )   (13 )   (24 )   50     (8 )
    
  
 
 
 
 

Operating leverage, excluding merger-related and restructuring

    expenses, and other intangible amortization

         $ (876 )   197     (75 )   725     8  
    
  
 
 
 
 

DIVIDEND PAYOUT RATIOS ON COMMON SHARES

                                      

Dividends paid per common share

    R    $ 0.64     0.56     0.56     0.56     0.56  
    
  
 
 
 
 

Diluted earnings per common share (GAAP)

    S    $ 0.89     1.22     1.20     1.20     1.17  

Merger-related and restructuring expenses (GAAP)

           0.01     0.01     —       0.01     0.02  

Other intangible amortization (GAAP)

           0.03     0.04     0.04     0.05     0.04  

Discontinued operations (GAAP)

           —       —       —       (0.02 )   —    
    
  
 
 
 
 

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

    T    $ 0.93     1.27     1.24     1.24     1.23  
    
  
 
 
 
 

Dividend payout ratios

                                      

GAAP

    R/S      71.91 %   45.90     46.67     46.67     47.86  

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

    R/T      68.82 %   44.09     45.16     45.16     45.53  
    
  
 
 
 
 
* The letters included in the columns are provided to show how the various ratios presented in the tables on pages 22 and 23 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.