Wachovia Corp New (WBPS) 10-Q 2002 Q3 Quarterly report

W A C H O V I A   C O R P O R A T I O N   A N D   S U B S I D I A R I E S

Third Quarter 2002

Management’s Discussion and Analysis
Quarterly Financial Supplement
Nine Months Ended September 30, 2002

WACHOVIA CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL SUPPLEMENT
NINE MONTHS ENDED SEPTEMBER 30, 2002
TABLE OF CONTENTS

PAGE

Financial Highlights	1
Management’s Discussion and Analysis	2
Selected Statistical Data	27
Summaries of Income, Per Common Share and Balance Sheet Data	28
Merger-Related and Restructuring Charges	29
Business Segments	30
Fee and Other Income — Corporate and Investment Bank	46
Selected Ratios	47
Securities	48
Loans — On-Balance Sheet, and Managed and Servicing Portfolios	49
Loans Held for Sale	50
Allowance for Loan Losses and Nonperforming Assets	51
Nonaccrual Loan Activity	52
Goodwill and Other Intangible Assets	53
Deposits	54
Time Deposits in Amounts of $100,000 or More	54
Long-Term Debt	55
Changes in Stockholders’ Equity	56
Capital Ratios	57
Risk Management Derivative Financial Instruments	58
Risk Management Derivative Financial Instruments — Expected Maturities	60
Risk Management Derivative Financial Instruments Activity	61
Net Interest Income Summaries — Five Quarters Ended September 30, 2002	62
Net Interest Income Summaries — Nine Months Ended September 30, 2002 and 2001	64
Consolidated Balance Sheets — Five Quarters Ended September 30, 2002	65
Consolidated Statements of Income (Loss) — Five Quarters Ended September 30, 2002	66
Consolidated Statements of Income — Nine Months Ended September 30, 2002 and 2001	67
Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2002 and 2001	68

FINANCIAL HIGHLIGHTS

					Three Months Ended										Nine Months Ended
					September 30,										September 30,
								Percent									Percent
								Increase									Increase
(Dollars in millions, except per share data)		2002			2001			(Decrease)				2002			2001		(Decrease)
FINANCIAL HIGHLIGHTS
Net interest income(Tax-equivalent)		$	2,520			1,974			28	%		$	7,512			5,450		38	%
Fee and other income			1,890			1,032			83				6,027			4,236		42
Total revenue(Tax-equivalent)			4,410			3,006			47				13,539			9,686		40
Provision for loan losses			435			1,124			(61	)			1,171			1,566		(25	)
Noninterest expense			2,945			2,395			23				8,640			6,801		27
Income taxes(Tax-equivalent)			114			(179	)		(164	)			1,044			436		139
Net income			916			(334	)		(374	)			2,684			883		204
Dividends on preferred stock			3			—			—				15			—		—
Net income available to common stockholders		$	913			(334	)		(373	)%		$	2,669			883		202	%
DILUTED EARNINGS PER COMMON SHARE
	Net income	$	0.66			(0.31	)		(313	)%		$	1.95			0.85		129	%
PROFITABILITY
Return on average common stockholders’ equity			11.63	%		(6.52	)		—				11.95	%		6.78		—
Net interest margin			3.93			3.58			—				3.93			3.47		—
Fee and other income as % of total revenue			42.86			34.33			—				44.52			43.73		—
Effective income tax rate			6.20	%		40.04			—				24.80	%		27.15		—
BALANCE SHEET DATA
Securities		$	72,071			56,929			27	%		$	72,071			56,929		27	%
Loans, net			157,542			169,680			(7	)			157,542			169,680		(7	)
Total assets			333,880			325,897			2				333,880			325,897		2
Total deposits			187,785			180,549			4				187,785			180,549		4
Long-term debt			39,758			43,233			(8	)	��		39,758			43,233		(8	)
Stockholders’ equity		$	32,105			28,506			13	%		$	32,105			28,506		13	%
CAPITAL ADEQUACY
Tier I capital ratio			8.11	%		6.75			—				8.11	%		6.75		—
Total capital ratio			12.02			10.84			—				12.02			10.84		—
Leverage ratio			6.82	%		7.22			—				6.82	%		7.22		—
ASSET QUALITY
Allowance as % of loans, net			1.81	%		1.79			—				1.81	%		1.79		—
Allowance as % of nonperforming assets			149			186			—				149			186		—
Net charge-offs as % of average loans, net			0.59			0.73			—				0.80			0.60		—
Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale			1.23	%		1.08			—				1.23	%		1.08		—
OTHER DATA
Employees			80,987			85,534			(5	)%			80,987			85,534		(5	)%
Financial centers			3,342			3,461			(3	)			3,342			3,461		(3	)
ATMs			4,604			4,698			(2	)			4,604			4,698		(2	)
Common shares outstanding(In millions)			1,373			1,361			1				1,373			1,361		1
Common stock price		$	32.69			31.00			5			$	32.69			31.00		5
Book value per common share		$	23.38			20.94			12			$	23.38			20.94		12
Common stock price to book value			140	%		148			—				140	%		148		—
Market capitalization		$	44,887			42,191			6			$	44,887			42,191		6
Dividends paid per common share		$	0.26			0.24			8	%		$	0.74			0.72		3	%

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[Wachovia Logo] WACHOVIA

     The following discussion and other portions of this Quarterly Report contain various forward-looking statements. Please refer to our 2002 Third Quarter Report on Form 10-Q for a discussion of various factors that could cause our actual results to differ materially from those expressed in such forward-looking statements. In addition, please refer to our 2001 Annual Report on Form 10-K for further information related to our accounting policies, off-balance sheet profile, and risk governance and administration.

Management’s Discussion and Analysis

     Wachovia’s results in 2002 reflect the merger of First Union and the former Wachovia, which closed on September 1, 2001. Because this merger was accounted for under the purchase method of accounting, periods before September 1, 2001, have not been restated. Therefore, the nine months results for 2001 include eight months of First Union and one month of the combined company.

Summary of Results of Operations
		Three Months Ended					Nine Months Ended
		September 30,					September 30,
(In millions, except per share data)		2002		2001			2002		2001
Net interest income(a)		$	2,520		1,974			7,512		5,450
Fee and other income			1,890		1,032			6,027		4,236
	Total revenue(a)		4,410		3,006			13,539		9,686
Provision for loan losses			435		1,124			1,171		1,566
Noninterest expense, excluding goodwill and other intangible amortization			2,793		2,278			8,159		6,529
Goodwill and other intangible amortization			152		117			481		272
Income taxes(a)			114		(179	)		1,044		436
Net income (loss)			916		(334	)		2,684		883
Dividends on preferred stock			3		—			15		—
Net income (loss) available to common stockholders			913		(334	)		2,669		883
Per diluted common share
Net income (loss)		$	0.66		(0.31	)		1.95		0.85
(a) Tax-equivalent

Financial SummaryIn the first nine months of 2002, net income available to common stockholders was $2.7 billion, or $1.95 per share, compared with $883 million, or 85 cents, in the first nine months of 2001. Total tax-equivalent net interest income of $7.5 billion in the first nine months of 2002 rose $2.1 billion from the first nine months of 2001, driven primarily by the addition of earning assets from the former Wachovia, wider spreads resulting from declines in interest rates, growth in low-cost core deposits and declines in higher-cost deposit products such as certificates of deposit and other time deposits.

     The provision for loan losses of $1.2 billion in the first nine months of 2002 declined $395 million or 25 percent from the same period in 2001. The provision was higher a year ago primarily due to steps we took in the third quarter of 2001 to reduce the risk inherent in a larger loan portfolio resulting from the merger, as well as to address risk in our loan portfolio driven by a weakened economic environment. In the first nine months of 2002, we continued to mitigate risk and strengthen our balance sheet by transferring many at-risk credits, including a substantial amount of emerging telecommunications exposure, to held for sale.

     Fee and other income of $6.0 billion in the first nine months of 2002 increased $1.8 billion from the first nine months of 2001, largely due to the addition of the former Wachovia and a significant decline in net principal investing losses. Otherwise, a weak economic environment dampened growth in market-related revenue, such as brokerage, asset management, and advisory, underwriting and other investment banking fees. In addition, net securities gains of $123 million offset the impact of credit actions and net trading losses in the first nine months of 2002, and compared with net securities losses of $51 million in the first nine months of 2001.

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     Noninterest expense of $8.6 billion in the first nine months of 2002 increased $1.8 billion, or 27 percent, from the first nine months of 2001, primarily reflecting the addition of expenses from the former Wachovia, as well as amortization of intangibles and net merger-related and restructuring charges recorded in connection with the merger, litigation settlements and additions to legal reserves. Results also include $38 million pre-tax, ($26 million after-tax, or two cents per share) of expense related to stock options. The increase was partially offset by expense efficiencies resulting from merger integration, expense control initiatives and the elimination of goodwill amortization in 2002.

     Results in the first nine months of 2002 also reflected a significantly lower tax provision due primarily to the recognition of a tax benefit recorded in the third quarter of 2002 related to a loss on our investment in The Money Store. This tax benefit fully offset credit and legal actions taken in the quarter as part of our ongoing efforts to reduce balance sheet risk.

     Wachovia’s board of directors announced an increase in the third quarter 2002 common stock dividend of two cents per share, to 26 cents per quarter or $1.04 annualized. This represents a cash dividend payout ratio of 33 percent, in line with the corporate goal of 30 percent to 35 percent of cash earnings per share. The board of directors also declared a third quarter cash dividend on Wachovia’s Dividend Equalization Preferred Shares (DEPs) of four cents per share. In October, the board of directors declared a fourth quarter common stock dividend and DEPs dividend of 26 cents per share and four cents per share, respectively, payable on December 16, 2002, to stockholders of record on November 29, 2002.

     Third quarter 2002 net income available to common stockholders was $913 million, or 66 cents per share. In the third quarter of 2001, a net loss of $334 million, or 31 cents, was reported. These results included after-tax net principal investing losses of $19 million in the third quarter of 2002, or one cent per share, compared with $380 million, or 34 cents, in the third quarter of 2001. These results also included after-tax net merger-related and restructuring charges of $67 million, or five cents per share, in 2002 and $57 million, or five cents, in 2001. See theMerger-Related and Restructuring Chargessection for additional information.

     First Union-Wachovia MergerThe merger of the former Wachovia and First Union closed on September 1, 2001, and the combined company adopted the name “Wachovia Corporation.” The merger was accounted for under the purchase method of accounting, and accordingly, the results for the nine months ended September 30, 2001, include eight months of First Union and one month of the combined company.

     In connection with the merger, shareholders of the former Wachovia received two First Union shares for each former Wachovia common share and were also given the right to choose either a one-time cash payment of 48 cents per common share of the former Wachovia or two shares of a new class of preferred shares, which pays dividends equal to the difference between the last dividend paid by the former Wachovia of 30 cents per share and the common stock dividend declared by the combined company. This dividend will cease once Wachovia’s total dividends paid to common stockholders for four consecutive quarters equal at least $1.20 per common share. More information is in theStockholders’ Equitysection.

     The merger integration is progressing well and much has already been achieved. By the end of the third quarter of 2002:

• Data center operations in Jacksonville, Florida, were consolidated at a Winston-Salem data center site.

• Including the data center consolidation, 47 percent of systems-related activities had been completed. These included: deployment of the General Bank sales referral and lead system; deployment of the teller system and a branch automation upgrade in Florida; and conversion of automated clearinghouse systems, which process an average of 63 million items, or $250 billion, monthly.

• Streamlined product selection was introduced in advance of upcoming deposit conversions to help familiarize sales force and customers with new product features.

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• Branding as Wachovia Securities was completed for both the Capital Management Group and Corporate and Investment Bank businesses.

• More than 840,000 hours out of 1.5 million hours of planned product and system training was conducted year-to-date.

• More than 120 new series 6 and series 63 sales representatives were licensed in the legacy Wachovia branch system, for a year-to-date total of 439 new registered representatives.

• Customer satisfaction scores reached record levels, and voluntary employee attrition remained a low 14 percent year-to-date, compared with 18 percent in 2001.

• Expense efficiencies amounting to $155 million across all segments were achieved in the third quarter and, combined with $317 million achieved in the first half of 2002, represented 53 percent of the annual goal of $890 million in 2004.

     The September 30, 2002, consolidated balance sheet includes the assets and liabilities of the former Wachovia, which were recorded at their respective fair values as of September 1, 2001. Based on the former Wachovia ending tangible assets of $70 billion, liabilities of $64 billion and tangible equity of $5.5 billion, an aggregate purchase price of $13.0 billion and net purchase accounting adjustments of $2.1 billion, the merger resulted in total intangible assets of $9.6 billion. Of the $9.6 billion, $1.9 billion was assigned to deposit base intangible and $340 million was assigned to other intangibles, primarily related to the customer relationships and trade name of the former Wachovia. Under new accounting standards that were effective on July 1, 2001, the $7.4 billion of goodwill recorded in connection with this merger is not subject to amortization. Deposit base and customer relationship intangibles are being amortized using accelerated methods and the trade name intangible, because of its indefinite life, is not subject to amortization. More information is in theAccounting and Regulatory Matterssection.

     In the first nine months of 2002, additional goodwill associated with the Wachovia merger of $131 million was recorded. We obtained additional information relative to the fair values of certain assets and liabilities of the former Wachovia that resulted in refinements to the initial estimates, which are now final. Of the $131 million, we recorded $110 million pre-tax, or $74 million after tax, related to exit costs of the former Wachovia including employee termination costs and facilities-related costs net of branch sale gains.

Outlook

     We continue to make excellent progress in meeting our corporate objectives of quality earnings growth, improved customer service, tight expense control and a strengthened balance sheet. Financial performance has been enhanced by increased attention to customer service, underscored by the 14th consecutive quarter of improved customer satisfaction rankings, which now place us among “best in class.” This level of service has contributed to growth in low-cost core deposits, where we are among the industry’s leaders in our markets. At the same time, our balanced business model positions us well to attract our customers’ investment business when the financial markets ultimately recover. We have continued to invest in building our businesses, including upgrading branch automation and making selected acquisitions to enhance our insurance and investment management offerings. Expense management discipline and merger efficiencies continue to enable us to hold the line on expense growth. In addition, the tier 1 capital ratio improved 107 basis points from year-end 2001 to 8.11 percent at September 30, 2002, ahead of our year-end 2002 goal of 8.00 percent.

     The first nine months of 2002 were marked by historical lows and extreme volatility in the equity markets. The pace of economic growth in the rest of 2002 is uncertain, and we expect modest revenue growth in our core banking businesses while remaining cautious about revenue growth in certain market-sensitive businesses. We also expect flat expenses, improvement in credit quality trends, margin compression and continued improvement in capital ratios.

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     In the third quarter of 2002, we adopted the fair value method of accounting for stock options effective for grants made in 2002 and thereafter. Under this method, expense is measured as the fair value of stock options as of the grant date and the expense is recognized evenly over the vesting period. The third quarter financial impact of options awarded in 2002 was $13 million after-tax, or one cent per share. Additionally, second quarter 2002 earnings have been changed to reflect a $13 million after-tax impact of this adoption. The fourth quarter 2002 impact will be $13 million after-tax, or one cent per share. The impact of the 2002 grant will be expensed over a three-year vesting period. In addition, the impact of any future grants will be recorded over their vesting periods.

     Assuming we were to continue our stock option grants at comparable levels for the next four years and assuming all fair value and vesting assumptions remain unchanged, the after-tax impact on net income available to common stockholders of the fair value method of accounting for stock options would be approximately $87 million in 2003; $137 million in 2004; and $150 million in 2005. The impact in 2005 would represent the estimated ongoing annual impact.

     We are reviewing the assumptions related to the accounting for our pension plan obligations, as we do annually. Although our assumptions have not been finalized, we expect that, based on recent market conditions, our pension expense will increase beginning in 2003. Each 25 basis point reduction in either our long-term expected rate of return, which was 10 percent in 2001, or our discount rate, which was 7.25 percent in 2001, would increase our 2003 pension expense by approximately $11 million and $23 million before income taxes, respectively.

     In the first nine months of 2002, we made contributions to our qualified pension plan amounting to $703 million. While the actuarial calculation is not complete at this time, we anticipate that the fair value of the plan assets will exceed the accumulated benefit obligation at September 30, 2002, our annual measurement date.

     We are optimistic about the future due to strategies in place and demographic trends that favor our core businesses of the General Bank, Capital Management, Wealth Management and the Corporate and Investment Bank. The General Bank continued to build momentum with a strong increase in low-cost core deposits, record sales of consumer and small business loans and good investment sales production. Our Corporate and Investment Bank, Capital Management and Wealth Management businesses also performed well relative to trends in their respective industries in light of the challenging financial markets.

     We will continue to evaluate our operations and organizational structures to ensure they are closely aligned with our goal of maximizing performance through increased efficiency and competitiveness in our four core businesses. When consistent with our overall business strategy, we may consider the disposition of certain assets, branches, subsidiaries or lines of business. We continue to routinely explore acquisition opportunities in areas that would complement our core businesses, and frequently conduct due diligence activities in connection with possible acquisitions. As a result, acquisition discussions and, in some cases, negotiations frequently take place and future acquisitions involving cash, debt or equity securities could occur.

5

Corporate Results of Operations

Average Balance Sheets and Interest Rates
		Nine Months Ended					Nine Months Ended
		September 30, 2002					September 30, 2001
		Average					Average
(In millions)		Balance		Rate			Balance		Rate
Interest-bearing bank balances		$	3,276		2.00	%	$	2,031		4.70	%
Federal funds sold			11,104		3.14			8,674		4.64
Trading account assets			15,676		4.64			13,955		5.80
Securities			59,186		6.26			50,324		7.21
Commercial loans, net			98,104		6.60			79,117		8.12
Consumer loans, net			56,485		6.97			44,961		8.29
	Total loans, net		154,589		6.74			124,078		8.18
Other earning assets			11,404		5.13			10,352		7.72
	Total earning assets		255,235		6.21			209,414		7.59
Interest-bearing deposits			140,483		2.47			113,400		4.28
Federal funds purchased			31,906		2.85			26,379		5.40
Commercial paper			3,151		1.17			2,643		4.20
Other short-term borrowings			10,026		2.50			9,754		2.95
Long-term debt			39,538		2.91			37,041		5.24
	Total interest-bearing liabilities		225,104		2.59			189,217		4.55
Net interest income and margin		$	7,512		3.93	%	$	5,450		3.47	%

Net Interest Income and MarginNet interest income on a tax-equivalent basis increased $2.1 billion from the first nine months of 2001 to $7.5 billion in the first nine months of 2002. The net interest margin increased 46 basis points to 3.93 percent in the first nine months of 2002 from the first nine months of 2001. The average federal funds purchased rate declined 255 basis points year over year. Our interest rate risk position generally benefits in a declining rate environment because liabilities reprice more quickly than assets. The increase in net interest income and in the margin was due to the lower interest rate environment, an increase in the proportion of low-cost core deposits and the addition of earning assets from the former Wachovia. These benefits were partially offset by the sale and securitization of home equity loans as well as branch divestitures that took place in the first nine months of 2002. If the current interest rate environment continues into the fourth quarter, we expect to experience margin compression in the range of 7 basis points to 10 basis points. We employ balance sheet management strategies designed to minimize margin compression while maintaining an appropriate interest rate risk profile.

     The contribution of hedge-related derivatives to the net interest margin increased from 15 basis points in the first nine months of 2001 to 41 basis points in the first nine months of 2002. In order to maintain our targeted interest rate risk profile, derivatives are used to hedge the interest rate risk inherent in our assets and liabilities. In a declining rate environment, an increase in the contribution of derivatives, primarily interest rate swaps on fixed rate debt, and floating rate loans, offsets declining net interest income from our balance sheet positions. However, it is important to evaluate hedge-related derivative income within the overall context of interest rate risk management. Our derivatives activity is undertaken as part of a program to manage interest rate risk and maintain a stable net interest margin. As one example, we use derivatives to swap our fixed-rate debt issuances to floating rate debt. We do this rather than issue floating rate debt because there is a broader market for fixed rate debt. TheRisk Governance and Administration section provides additional information on our methodology for interest rate risk management.

     Premiums and discounts that resulted from recording the interest-earning assets and the interest-bearing liabilities of the former Wachovia at their respective fair values at September 1, 2001, are being accreted and amortized using methods that result in a constant effective yield over the terms of the assets and liabilities. This net accretion increased net interest income by $225 million, or 12 basis points, in the first nine months of 2002. The projected increase in net interest income resulting from net accretion related to these premiums and discounts for the rest of 2002 is $33 million. When the assets and liabilities subject to purchase accounting mature, they will be replaced by new assets and liabilities with market yields. Therefore, we do not expect this reduction in net accretion to have a material effect on net interest income.

6

     The average rate on earning assets declined 138 basis points from the first nine months of 2001 to 6.21 percent in the first nine months of 2002 and the average rate on interest-bearing liabilities decreased 196 basis points from the first nine months of 2001 to 2.59 percent in the first nine months of 2002.

Fee and Other Income
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(In millions)		2002			2001			2002			2001
Service charges and fees		$	664			541			1,986			1,495
Commissions			458			356			1,403			1,120
Fiduciary and asset management fees			427			400			1,370			1,165
Advisory, underwriting and other investment banking fees			72			177			537			613
Principal investing			(29	)		(585	)		(161	)		(686	)
Other income			298			143			892			529
	Total fee and other income	$	1,890			1,032			6,027			4,236

Fee and Other IncomeFee and other income of $6.0 billion in the first nine months of 2002 increased $1.8 billion from the first nine months of 2001 largely due to fee and other income from the former Wachovia and significantly lower net principal investing losses.

     Service charges and fees increased $491 million from the first nine months of 2001 to $2.0 billion in the first nine months of 2002 due to the addition of the former Wachovia. Commissions, which include brokerage and insurance commissions, increased $283 million to $1.4 billion, while fiduciary and asset management fees increased $205 million to $1.4 billion from the first nine months of 2001. Growth in commissions and fiduciary and asset management fees was primarily due to the addition of the former Wachovia and modest organic growth despite a weakened trading environment.

     Advisory, underwriting and other investment banking fees declined $76 million to $537 million in the first nine months of 2002 primarily due to trading losses particularly in July and August of 2002. Advisory, underwriting and other investment banking fees in the first nine months of 2002 included an incremental $42 million in fees related to the securitization of assets from one of our multi-seller commercial paper conduits. Trading account profits of $66 million in the first nine months of 2002 included a $42 million loss related to the purchase of $361 million of assets from the conduit pursuant to a credit enhancement agreement we have with the conduit. Total assets purchased from the conduit were $596 million in the first nine months of 2002. Trading account profits were $278 million in the first nine months of 2001, which included losses of $57 million primarily related to the purchase of $144 million of assets from the conduit.

     Principal investing, which includes the results of investments in equity and mezzanine securities, had net losses of $161 million in the first nine months of 2002, a decline from $686 million in net losses in the first nine months of 2001. The $686 million net losses in the first nine months of 2001 included write-downs largely on 1999 and 2000 vintage private equity investments in the telecommunications and technology sectors.

     Other income, including results from portfolio securities transactions and asset sales and securitizations, increased to $892 million, up $363 million from the first nine months of 2001. Net portfolio securities gains of $123 million included $124 million in impairment losses. These securities gains were taken to partially offset the $71 million in third quarter 2002 net trading losses and a second quarter 2002 write-down of Argentine loans. Net portfolio securities losses of $51 million in the first nine months of 2001 included $168 million in impairment losses. Asset sales and securitization income increased $98 million from the first nine months of 2001. Included in this increase was $38 million related to mortgage sales and securitization income and $60 million related to other securitization income. Net gains from market value adjustments or sales of loans held for sale were $40 million in the first nine months of 2002 and a net loss of $49 million in the first nine months of 2001. Other income in the first nine months of 2002 included an increase of $78 million from investments classified as other assets primarily due to additions from the former Wachovia. Other income in the first nine months of 2001 included a $75 million gain recorded in connection with the sale of Star Systems, Inc.

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Noninterest Expense
		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(In millions)		2002		2001		2002		2001
Salaries and employee benefits		$	1,588		1,374		4,916		4,147
Occupancy			195		176		584		520
Equipment			234		214		691		632
Advertising			20		15		64		45
Communications and supplies			136		117		402		338
Professional and consulting fees			111		79		295		246
Goodwill and other intangible amortization			152		117		481		272
Merger-related and restructuring charges			107		85		242		18
Sundry expense			402		218		965		583
	Total noninterest expense	$	2,945		2,395		8,640		6,801

Noninterest ExpenseNoninterest expense increased $1.8 billion from the first nine months of 2001 to $8.6 billion due to the addition of expenses related to the former Wachovia, increased amortization related to intangibles and net merger-related and restructuring charges recorded in connection with the merger. The increase in expenses was partially offset by the impact of expense control initiatives, merger efficiencies and the elimination of goodwill amortization. Salaries and employee benefits in the first nine months of 2002 included $38 million related to the adoption of the fair value method of accounting for stock options. Goodwill and other intangible amortization expense amounted to $481 million in the first nine months of 2002 and $272 million in the first nine months of 2001. Merger-related and restructuring charges, which are discussed below, were $242 million in the first nine months of 2002 and $18 million in the first nine months of 2001. The increase in sundry expense included $131 million associated with legal settlements and additions to legal reserves in the third quarter of 2002. TheAccounting and Regulatory Matters-Business Combinationssection has further information related to goodwill and other intangible assets.

Merger-Related and Restructuring ChargesWe are executing a number of plans to integrate the operations of First Union and the former Wachovia. Certain costs of the merger integration, such as employee termination benefits for employees of First Union and system integration costs, are recorded as merger-related and restructuring charges in the consolidated statements of income. The merger-related and restructuring charges in the consolidated statements of income will continue to be recognized throughout our previously announced three-year integration period. Additionally, in accordance with the purchase method of accounting, certain other costs associated with the integration plans, such as employee termination benefits for employees of the former Wachovia, were treated as adjustments to goodwill. We finalized all integration plans that would affect goodwill by September 1, 2002. Beginning in the fourth quarter of 2002, all former Wachovia exit costs will be recorded as merger-related and restructuring charges in our consolidated statements of income.

     In the first nine months of 2002, we recorded $242 million in net merger-related and restructuring charges. These charges consisted of $363 million primarily related to systems conversion, occupancy and equipment, advertising and employee termination costs, which were partially offset by gains of $121 million from the sale of 27 First Union branch offices. Net merger-related and restructuring charges include $25 million of incremental advertising expense specifically related to merger activity such as branch conversions. We expect these advertising charges to increase significantly as branch conversions begin to take place toward the end of this year.

     In the first nine months of 2002, we recorded a net $110 million of purchase accounting adjustments that included $157 million of employee termination, facilities-related and other costs and $47 million in gains on the sale of 10 former Wachovia branch offices.

     Total employee termination costs, including purchase accounting adjustments and merger-related and restructuring charges, were $100 million in the first nine months of 2002, and included severance payments and related expenses for 2,338 employees. Of the 2,338 employees, 47 percent were from staff support areas within the Parent segment, 27 percent were from the General Bank segment, 3 percent were from the Corporate and Investment Bank segment, 12 percent were from the Capital Management segment and 11 percent were from the Wealth Management segment.

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     Since the consummation of the merger on September 1, 2001, $263 million of employee termination costs have been recorded representing 3,578 employee terminations. Of the $263 million, $111 million was recorded as merger-related and restructuring charges and $152 million was recorded as purchase accounting adjustments. Through September 30, 2002, we have paid $80 million in employee termination costs recorded as restructuring charges and $92 million as purchase accounting adjustments, leaving $31 million and $60 million from the restructuring charges and purchase accounting adjustments, respectively, for future payments.

     In the first nine months of 2001, we recorded a net charge of $18 million pre-tax in net merger-related and restructuring charges primarily in connection with the Wachovia merger and the completion of the strategic repositioning announced in June 2000. Net charges in connection with the Wachovia merger were $82 million and consisted primarily of employee termination costs, costs associated with the defense of the merger against a hostile bid and other merger-related personnel costs. In addition we recorded net reversals of $73 million of previously recorded restructuring charges principally related to the finalization of estimates for employee terminations, contract cancellations and occupancy costs in connection with the 2000 strategic repositioning. Also included in the $18 million net charge were $23 million in systems integration costs related to other mergers and $14 million in reversals of costs recorded in the March 1999 restructuring charge based on finalization of employee terminations and benefits.

     For more information related to merger-related and restructuring charges, see theMerger-Related and Restructuring Charges andGoodwill and Other Intangible Assetstables.

Income TaxesIncome taxes of $885 million in the first nine months of 2002 increased $556 million from the first nine months of 2001, and the effective tax rates were 24.80 percent and 27.15 percent in those respective periods. In the third quarter of 2002, income taxes of $60 million and an effective tax rate of 6.20 percent included a benefit of $218 million primarily related to a loss on our investment in The Money Store, Inc. In June 2000, we recorded a $1.8 billion write-down for impairment of goodwill to reflect the lower fair value of our investment in The Money Store for financial reporting purposes, but did not record any related tax benefit. In the third quarter of 2002, The Money Store issued preferred stock to unrelated third parties, resulting in the recognition of the tax benefit. The tax benefit fully offset credit risk reduction and legal actions taken in the third quarter of 2002 as part of our ongoing effort to reduce balance sheet risk. Our tax provision in the fourth quarter will include a tax benefit expected to be in excess of $90 million related primarily to The Money Store. We expect to also use this benefit to further reduce balance sheet risk. Our current effective tax rate for the first nine months of 2002, excluding the tax benefit principally related to The Money Store, was 30.91 percent. We expect a similar effective tax rate for the full years 2002 and 2003.

Business Segments

     Wachovia provides a diversified range of banking and nonbanking financial services and products primarily through our four core business segments, the General Bank, Capital Management, Wealth Management and the Corporate and Investment Bank. The following Business Segment discussion covers the results for these four core business segments plus the Parent, and is on a segment earnings basis, which excludes net merger-related, restructuring charges, and other charges and gains. Segment earnings are the basis upon which we manage and allocate capital to our business segments.

     In the first nine months of 2001, we reported other charges and gains, in addition to merger-related and restructuring charges, that were also not included in individual segment earnings results. Most of these other charges and gains were related to corporate actions taken in the third quarter of 2001, including:

• A $549 million pre-tax provision for loan losses to provide for deterioration in our loan portfolio as a result of a weakening economy and a $331 million pre-tax provision for loan losses representing the impact of integrating the two loan portfolios and of transferring $1.5 billion of higher risk loans to held for sale. These adjustments to the provision are a significant component of the $1.6 billion provision for loan losses in the first nine months of 2001 discussed in the Provision and Allowance for Loan Lossessection.

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• A net increase in fee and other income of $25 million pre-tax related to a $73 million gain on the sale of branches offset primarily by net market value write-down of certain loans held for sale. This net increase is included in the $4.2 billion of fee and other income in the first nine months of 2001 discussed in theFee and Other Incomesection.

• $166 million in noninterest expense that primarily included employee termination costs, professional fees, premises consolidation costs and system deconversion costs. These expense items are included in the $6.8 billion of noninterest expenses in the first nine months of 2001 discussed in theNoninterest Expensesection.

     We use cash earnings to measure our progress against our targeted goals, such as earnings per share growth, overhead efficiency ratios and dividend payout ratios. Segment and cash earnings exclude after-tax net merger-related and restructuring charges, other charges and gains, and preferred stock dividends from results prepared using U.S. generally accepted accounting principles (GAAP). Cash earnings also exclude after-tax deposit base intangible, goodwill and other intangible amortization. The cash overhead efficiency ratio is the result of dividing noninterest expense, excluding net merger-related and restructuring charges and deposit base intangible, goodwill and other intangible amortization by the total of tax-equivalent net interest income and fee and other income.

     We use a management reporting model that includes methodologies for funds transfer pricing, allocation of economic capital, expected losses and cost transfers. Under this model, intersegment revenues are paid by a segment to the segment that distributes or services the product. The amount of the referral fee is based on comparable fees paid in the market or negotiated amounts that approximate the value provided by the selling segment. Cost transfers are made for services provided by one segment to another. Activity-based costing studies are continually being refined to better align expenses with products and their revenues.

     We continuously refine assumptions and methodologies to better reflect the true economics of our business segments. None of these refinements had a significant impact on segment earnings.

     However, in 2002 for segment reporting purposes we changed the way we report tax credits for historic and low-income housing. In past years, the write-downs associated with this business were recorded as fee income and the associated tax credits were in income taxes. We now report the write-downs net of the related tax benefit in fee and other income. This is consistent with the reporting of other tax-preferred items. Results for 2001 were restated to reflect these changes.

General Bank
Performance Summary
		Three Months Ended					Nine Months Ended
		September 30,					September 30,
(In millions)		2002			2001		2002		2001
Income statement data
Net interest income(Tax-equivalent)		$	1,730			1,276		5,087		3,498
Fee and other income			519			434		1,525		1,146
Intersegment revenue			38			35		120		98
	Total revenue(Tax-equivalent)		2,287			1,745		6,732		4,742
Provision for loan losses			114			97		327		295
Noninterest expense			1,256			1,015		3,693		2,835
Income taxes(Tax-equivalent)			334			222		989		558
	Segment earnings	$	583			411		1,723		1,054
Performance and other data
Economic profit		$	415			289		1,221		779
Risk adjusted return on capital (RAROC)			40.85	%		38.71		40.67		39.58
Economic capital, average		$	5,519			4,298		5,504		3,777
Cash overhead efficiency ratio			54.88	%		57.64		54.84		58.99
Average loans, net		$	101,402			76,383		100,101		68,292
Average core deposits		$	141,860			109,641		139,217		101,864

General BankThe General Bank serves 8 million retail households and 900,000 small and middle-market businesses in 11 East Coast states and Washington, D.C., through 2,700 financial centers, 4,600 automated teller machines and online and telephone banking. Customized retail deposit and lending

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products include checking, savings and money market accounts, time deposits and IRAs, home equity, residential mortgage, student loans, credit cards and personal loans; and investment products include mutual funds and annuities. Small-business banking includes a full range of deposit, credit and investment products and services, and middle-market customers receive comprehensive commercial deposit, lending and commercial real estate solutions, as well as access to asset management, global treasury management and capital markets products and services through partnerships with Capital Management, Wealth Management and the Corporate and Investment Bank.

     Our strategic focus is on providing exceptional customer service combined with leveraging in-depth customer knowledge to deepen, enhance and retain existing relationships, in addition to acquiring new ones, through tailored products and services. Our goal is to reduce the number of single-service customers and to increase the proportion of our customers who save, invest and borrow with us. The General Bank is particularly focused on providing excellent service to customers throughout the merger integration process, growing low-cost core deposits, and improving both loan spreads and efficiency.

     The General Bank segment includes Retail and Small Business, and Commercial. General Bank earnings of $1.7 billion in the first nine months of 2002 increased $669 million from the first nine months of 2001 due to strong growth in loans and deposits as well as the addition of the former Wachovia. Total revenue of $6.7 billion in the first nine months of 2002 increased $2.0 billion from the first nine months of 2001, also due to wider spreads driven by strong growth in core deposits and mortgage-related revenue, as well as the addition of revenue from the former Wachovia.

     Net interest income of $5.1 billion in the first nine months of 2002, an increase of $1.6 billion from the first nine months of 2001, reflected increases in average loans and average core deposits due to good organic growth as well as the addition of the former Wachovia. This growth excludes the impact of $195 million of commercial loans and $265 million of consumer loans divested in connection with branch sales in February 2002.

     Fee and other income of $1.5 billion in the first nine months of 2002, was up $379 million from the first nine months of 2001 due to mortgage-related revenue, as well as revenue from the addition of the former Wachovia.

     Noninterest expense of $3.7 billion increased $858 million in the first nine months of 2002 from the first nine months of 2001, reflecting the addition of the former Wachovia. Strong expense management and the realization of merger efficiencies were evident in an improved cash overhead efficiency ratio of 54.84 percent in the first nine months of 2002, down from 58.99 percent in the first nine months of 2001.

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Capital Management
Performance Summary
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(In millions)		2002			2001			2002			2001
Income statement data
Net interest income(Tax-equivalent)		$	47			42			136			120
Fee and other income			725			652			2,286			2,017
Intersegment revenue			(18	)		(17	)		(54	)		(51	)
	Total revenue(Tax-equivalent)		754			677			2,368			2,086
Provision for loan losses			—			—			—			—
Noninterest expense			623			574			1,968			1,732
Income taxes(Tax-equivalent)			48			36			146			122
	Segment earnings	$	83			67			254			232
Performance and other data
Economic profit		$	66			48			200			178
Risk adjusted return on capital (RAROC)			53.01	%		43.55			51.43			51.43
Economic capital, average		$	624			611			660			604
Cash overhead efficiency ratio			82.59	%		84.85			83.11			83.02
Average loans, net		$	177			269			177			170
Average core deposits		$	1,314			1,535			1,294			1,656

Capital ManagementOur Capital Management Group has created a growing and diversified business with a balanced mix of products and multiple channels of distribution. Through these channels, we offer a full line of investment products and services, including wrap accounts, our Evergreen family of mutual funds, fixed and variable annuities, defined benefit and defined contribution retirement services, corporate and institutional trust services, and other customized investment advisory services. These products and services are available through more than 8,000 registered representatives operating in our national retail brokerage network of 555 offices in 49 states; full-service retail financial centers in our East Coast marketplace; and online brokerage.

     CMG lines of business are Retail Brokerage Services, which includes the retail brokerage and insurance groups; and Asset Management, which includes mutual funds, customized investment advisory services and corporate and institutional trust services.

     CMG earnings of $254 million in the first nine months of 2002 increased $22 million from the first nine months of 2001 due to relatively stable revenues despite the weak equity markets, as well as the addition of the former Wachovia. CMG total revenue of $2.4 billion in the first nine months of 2002 increased $282 million from the first nine months of 2001.

     Assets under management of $227 billion at September 30, 2002, increased modestly from year-end 2001, as net sales in mutual funds offset the impact of the decline in the equity markets. Mutual fund assets grew to $107 billion at September 30, 2002, from $104 billion at year-end 2001 due primarily to strong fixed income and money market inflows. Broker client assets declined to $240 billion at September 30, 2002, from $274 billion at year-end 2001, reflecting the decline in the equity markets.

     CMG’s acquisition of certain assets of E-Risk Services, LLC, a leading agency provider of management liability insurance, closed October 1, 2002. The acquisition of J.L. Kaplan Associates, LLC, a privately held investment management firm with $3 billion in assets under management, closed on November 1, 2002.

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Wealth Management
Performance Summary
		Three Months Ended					Nine Months Ended
		September 30,					September 30,
(In millions)		2002			2001		2002		2001
Income statement data
Net interest income(Tax-equivalent)		$	101			62		296		158
Fee and other income			126			99		408		258
Intersegment revenue			1			—		4		—
	Total revenue(Tax-equivalent)		228			161		708		416
Provision for loan losses			3			2		11		2
Noninterest expense			163			114		497		284
Income taxes(Tax-equivalent)			23			16		73		45
	Segment earnings	$	39			29		127		85
Performance and other data
Economic profit		$	27			22		93		66
Risk adjusted return on capital (RAROC)			42.47	%		52.92		47.92		64.96
Economic capital, average		$	345			212		338		168
Cash overhead efficiency ratio			71.41	%		70.65		70.20		67.82
Average loans, net		$	8,854			5,680		8,630		4,837
Average core deposits		$	10,006			7,313		9,928		6,623

Wealth ManagementWealth Management provides a comprehensive suite of private banking, investment, financial planning and insurance services to high net worth individuals and families through approximately 60 teams of relationship managers and product specialists. Strategic partnerships with the General Bank, Capital Management, and the Corporate and Investment Bank ensure that a comprehensive array of financial solutions is available to clients across the entire Wachovia franchise. Products and services offered through Wealth Management include cash management; online account aggregation, banking and bill payment; credit and debt management products; risk management services including insurance; investment management and advisory including equity, fixed income and alternative investment management; financial, tax and estate planning services; philanthropy management including charitable trusts, foundation and planned giving services; and legacy management including personal trust and estate settlement services.

     Wealth Management earnings of $127 million in the first nine months of 2002 increased $42 million from the first nine months of 2001, reflecting the addition of the former Wachovia. Total revenue of $708 million in the first nine months of 2002 increased $292 million from the first nine months of 2001, reflecting the addition of revenue from the former Wachovia. The increase in expenses year over year similarly was due to the addition of expenses from the former Wachovia.

     Lower equity market valuations drove assets under management down 13 percent from year-end 2001 to $67 billion at September 30, 2002.

     Wealth Management’s acquisition of Cameron M. Harris & Company, a privately held insurance brokerage firm, closed on August 30, 2002.

Corporate and Investment BankOur Corporate and Investment Bank serves more than 2,500 large corporate and institutional clients nationwide primarily in 11 key industry sectors: healthcare; technology; media and communications; information technology and business services; financial institutions; real estate; consumer and retail; industrial growth; defense and aerospace; energy and power; and international.

     The Corporate and Investment Bank segment includes Corporate Banking, Investment Banking and Principal Investing.

• Corporate Banking products and services include large corporate lending, commercial and rail leasing, treasury services, correspondent banking operations and trade services.

• Investment Banking product and services include fixed income underwriting, sales, trading and research activities; equity underwriting, sales, trading and research activities; fixed income and equity derivatives; currency risk management; loan syndications; merger and acquisition advisory

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services; various real estate capital markets products and services; and asset securitization. In April 2002 we sold a small portfolio management platform that did not fit our strategic objectives. The sale of this platform resulted in an insignificant gain and will have no material impact on the future results of our Investment Banking business.

• Principal Investing includes direct investments primarily in private equity and mezzanine securities and investments in funds sponsored by select private equity and venture capital groups.

Corporate and Investment Bank
Performance Summary
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(In millions)		2002			2001			2002			2001
Income statement data
Net interest income(Tax-equivalent)		$	611			507			1,789			1,445
Fee and other income			348			(218	)		1,341			505
Intersegment revenue			(20	)		(16	)		(62	)		(43	)
	Total revenue(Tax-equivalent)		939			273			3,068			1,907
Provision for loan losses			317			126			832			289
Noninterest expense			508			485			1,550			1,467
Income taxes(Tax-equivalent)			45			(130	)		259			37
	Segment earnings	$	69			(208	)		427			114
Performance and other data
Economic profit		$	17			(359	)		159			(354	)
Risk adjusted return on capital (RAROC)			11.92	%		(10.50	)		13.86			4.34
Economic capital, average		$	7,145			6,328			7,437			6,175
Cash overhead efficiency ratio			54.11	%		n/m			50.52			76.72
Average loans, net		$	40,250			42,069			41,713			41,986
Average core deposits		$	12,832			10,479			12,599			10,041

     Corporate and Investment Bank earnings of $427 million in the first nine months of 2002 increased $313 million or nearly threefold from the first nine months of 2001 and total revenue of $3.1 billion in the first nine months of 2002 increased $1.2 billion or 61 percent from the same period a year ago primarily due to lower net principal investing losses and to the addition of the former Wachovia. The net loss in principal investing in the first nine months of 2002 of $161 million was down from a $686 million net loss in the first nine months of 2001. Our Principal Investing business was negatively affected by the significant decline in equity market valuations, particularly in the telecommunications and technology sectors, and the related change in debt and private equity capital availability afforded to venture capital-backed companies. The carrying value of the principal investing portfolio at September 30, 2002, was $2.2 billion and the investment mix was 57 percent direct investments (34 percent direct equity, 23 percent mezzanine) and 43 percent fund investments. Additionally, trading account profits declined $168 million from the same period last year due to increased market volatility, widening of credit spreads and generally difficult trading markets across most of our fixed income and equity products.

     The provision for loan losses of $832 million in the first nine months of 2002 increased from $289 million in the first nine months of 2001 due to three factors: a larger loan portfolio as a result of the merger; net charge-offs of $443 million related to the telecommunications sector, Argentina and the energy services sector; and an additional provision of $199 million associated with the transfer of $703 million of exposure, largely in the emerging telecommunications sector, to held for sale.

     Noninterest expense of $1.6 billion in the first nine months of 2002 increased $83 million from the first nine months of 2001 due to the addition of noninterest expense from the former Wachovia, offset by lower incentive expense due to weak markets.

     The revenue from the Principal Investing and Investment Banking businesses is typically more volatile than revenue from more traditional banking businesses and can vary significantly from period to period with market conditions. In addition Corporate Banking results may vary significantly from period to period as the credit quality of the loan portfolio changes.

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ParentParent includes all of our asset and liability management functions, as well as:

• The goodwill asset, funding cost and in 2001, the associated amortization expense;

• Certain revenue items not recorded in the business segments discussed in theFee and Other Incomesection;

• Certain expenses that are not allocated to the business segments;

• The results of The Money Store home equity lending, mortgage servicing, indirect auto leasing and credit card businesses that have been divested or are being wound down; and

• The results of our HomEq Servicing business, which is responsible for loan servicing for the former Money Store and home equity loans generated by our mortgage company. It should be noted that we are actively seeking to expand this business with new, third party loan servicing.

     Earnings in the Parent were $304 million in the first nine months of 2002 and $72 million in the first nine months of 2001. Total revenue in the Parent increased $153 million from the first nine months of 2001 to $663 million in the first nine months of 2002. This increase was primarily the result of net securities gains taken to offset the impact of net trading losses in the third quarter of 2002 and credit actions in the second quarter of 2002, as well as the addition of revenue from former Wachovia corporate investments. Net securities gains in the first nine months of 2002 were $156 million, compared with $31 million net securities gains in the first nine months of 2001. As discussed in theFee and Other Incomesection, fee and other income in the first nine months of 2002 included an incremental $42 million related to the securitization of assets from one of our multi-seller commercial paper conduits. Also included was a $42 million loss related to the purchase of $361 million of assets from the conduit pursuant to a credit enhancement agreement we have with the conduit. Fee and other income in the first nine months of 2001 included a $75 million gain recorded in connection with the sale of Star Systems, Inc.

     Noninterest expense of $690 million in the first nine months of 2002 increased $391 million from the first nine months of 2001 due to incremental deposit base intangible amortization expense as a result of the merger, costs associated with legal settlements, additions to legal reserves, and an expense of $38 million related to stock options as discussed in theNoninterest Expense section. The increase was partially offset by expense efficiencies resulting from merger integration, expense control initiatives and the elimination of goodwill amortization in 2002.

     As previously mentioned, Parent earnings in the first nine months of 2002 included a significantly lower tax provision due primarily to the recognition of a tax benefit recorded in the third quarter of 2002 related to a realized tax loss on our investment in The Money Store. This tax benefit fully offset credit and legal actions taken in the quarter as part our ongoing efforts to reduce balance sheet risk.

     TheFunding SourcesandRisk Governance and Administrationsections provide information about our funding sources and asset and liability management functions.

Balance Sheet Analysis

SecuritiesThe securities portfolio, all of which is classified as available for sale, consists primarily of U.S. Government agency and asset-backed securities. Activity in this portfolio is undertaken primarily to manage liquidity, interest rate risk and regulatory capital, and to take advantage of market conditions that create more economically attractive returns on these investments. We had securities available for sale with a market value of $72 billion at September 30, 2002, with the increase from $58 billion at December 31, 2001, reflecting the addition of retained interests from securitizations of loans in the second and third quarters of 2002 and the purchase of shorter duration agency and other asset-backed securities in the market.

     Included in securities available for sale at September 30, 2002, were residual interests with a market value of $1.1 billion, which included an unrealized gain of $399 million. Other assets at September 30, 2002, included residual interests with a book value and market value of $22 million. At December 31,

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2001, securities available for sale included residual interests with a market value of $792 million, which included a net unrealized gain of $94 million and other assets included residual interests with a book value and market value of $112 million. These residual interests resulted from the securitization of SBA, student, auto and home equity loans and prime equity lines. The increase in residual interests in securities available for sale from December 31, 2001, was primarily due to retained interests from 2002 securitizations, reclassification of residuals from other assets and normal updates to our residual interest valuation model. Residual interests are valued using various modeling techniques that incorporate market assumptions for credit losses, prepayments and discount rates. Assumptions for credit losses are adjusted as a result of actual performance of the assets. Prepayment and discount rate assumptions are adjusted as a result of changes in the interest rate environment. In 2002, updates for credit loss assumptions were the most significant impact to the valuation of residual interests.

     In the first nine months of 2002, we securitized certain residential mortgage loans to reduce funding costs, diversify funding sources and achieve more efficient capital levels. Residential mortgage loans of $4.5 billion were securitized into agency and other mortgage-backed securities, substantially all of which we retained as securities available for sale. In addition we securitized and sold $4.5 billion of prime equity lines, retaining $2.2 billion in the form of asset-backed securities and $143 million in the form of interest-only residuals.

Loans - On-Balance Sheet
		2002						2001
		Third		Second		First		Fourth		Third
(In millions)		Quarter		Quarter		Quarter		Quarter		Quarter
Commercial
Commercial, financial and agricultural		$	57,899		57,984		60,385		61,258		63,616
Real estate — construction and other			7,558		8,035		8,137		7,969		7,457
Real estate — mortgage			16,967		17,349		17,186		17,234		17,156
Lease financing			22,616		22,044		22,223		21,958		21,625
Foreign			6,992		7,241		6,920		7,653		7,572
	Total commercial		112,032		112,653		114,851		116,072		117,426
Consumer
Real estate — mortgage			17,527		19,803		20,901		22,139		25,466
Installment loans			37,889		35,940		36,073		34,666		35,577
Vehicle leasing			43		168		345		618		941
	Total consumer		55,459		55,911		57,319		57,423		61,984
Total loans			167,491		168,564		172,170		173,495		179,410
Unearned income			9,949		9,764		9,876		9,694		9,730
	Loans, net(on-balance sheet)	$	157,542		158,800		162,294		163,801		169,680
Loans — Managed Portfolio(Including on-balance sheet)
		2002						2001
		Third		Second		First		Fourth		Third
(In millions)		Quarter		Quarter		Quarter		Quarter		Quarter
Commercial		$	115,591		115,750		121,629		123,377		125,687
Real estate — mortgage			26,431		26,058		26,636		29,903		29,659
Installment loans			65,261		64,469		63,907		62,402		61,285
Vehicle leasing			43		168		345		618		941
	Total managed portfolio	$	207,326		206,445		212,517		216,300		217,572

LoansNet loans of $158 billion at September 30, 2002, declined 4 percent from December 31, 2001. While consumer loan originations were robust, the $6 billion decline represented reductions related to commercial portfolio management actions to reduce risk and to improve returns, weak commercial loan demand, and consumer loan sales and securitizations of $5 billion, including $4.5 billion of loans securitized into agency or other mortgage-backed securities. In addition, branch sales and runoff of the discontinued indirect auto lending and leasing portfolios reduced loans by $1 billion from December 31, 2001. Commercial loans represented 67 percent and consumer loans 33 percent of the loan portfolio at September 30, 2002.

Managed loans were $207 billion at September 30, 2002, and $216 billion at December 31, 2001. The $9 billion decline was primarily driven by planned reductions from commercial portfolio management actions and weak commercial loan demand as discussed above, coupled with the sale of a portfolio

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management platform. The managed loan portfolio includes the on-balance sheet loan portfolio, loans securitized for which the assets are classified in securities on-balance sheet, loans held for sale that are classified in other assets on-balance sheet and the off-balance sheet portfolio of securitized loans sold where we service the loans. The average rate earned on loans decreased 144 basis points from the first nine months of 2001 to 6.74 percent in the first nine months of 2002, which was in line with reductions in interest rates.

Asset Quality
		2002									2001
		Third			Second			First			Fourth			Third
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
Nonperforming assets
Nonaccrual loans		$	1,751			1,805			1,685			1,534			1,506
Foreclosed properties			156			156			159			179			126
	Total nonperforming assets	$	1,907			1,961			1,844			1,713			1,632
as % of loans, net and foreclosed properties			1.21	%		1.23			1.14			1.04			0.96
Nonperforming loans in loans held for sale		$	115			108			213			228			273
	Total nonperforming assets in loans and in loans held for sale	$	2,022			2,069			2,057			1,941			1,905
as % of loans, net, foreclosed properties and loans in other assets as held for sale			1.23	%		1.24			1.21			1.13			1.08
Allowance for loan losses
Balance, beginning of period		$	2,951			2,986			2,995			3,039			1,760
Former Wachovia balance, September 1, 2001			—			—			—			—			766
Net charge-offs			(224	)		(374	)		(325	)		(378	)		(243	)
Allowance relating to loans transferred or sold			(315	)		(58	)		(23	)		(47	)		(368	)
Provision for loan losses related to loans transferred or sold			211			23			14			3			230
Provision for loan losses			224			374			325			378			894
Balance, end of period		$	2,847			2,951			2,986			2,995			3,039
as % of loans, net			1.81	%		1.86			1.84			1.83			1.79
as % of nonaccrual and restructured loans (a)			163			163			177			195			202
as % of nonperforming assets (a)			149	%		150			162			175			186
Net charge-offs		$	224			374			325			378			243
Commercial, as % of average commercial loans			0.61	%		1.24			0.97			1.19			0.85
Consumer, as % of average consumer loans			0.56			0.48			0.59			0.48			0.53
Total, as % of average loans, net			0.59	%		0.97			0.83			0.93			0.73
Past due loans, 90 days and over
Commercial, as a % of loans, net			1.58	%		1.62			1.49			1.38			1.30
Consumer, as a % of loans, net			0.68	%		0.69			0.70			0.62			0.68
(a) These ratios do not include nonperforming loans included in other assets as held for sale

Nonperforming AssetsNonperforming assets, including nonperforming loans classified as loans held for sale, of $2.0 billion at September 30, 2002, increased 4 percent from December 31, 2001, due to a weakened economy and its impact on our borrowers. However, by September 30, 2002, telecommunications net charge-offs and write-downs in the held for sale portfolio mitigated the impact of that sector on period-end nonperforming assets. Nonperforming loans classified as loans held for sale amounted to $115 million at September 30, 2002, and $228 million at December 31, 2001. As a percentage of net loans, foreclosed properties and loans held for sale, nonperforming assets were 1.23 percent at September 30, 2002, and 1.13 percent at December 31, 2001.

Impaired LoansImpaired loans, which are included in nonperforming loans, amounted to $1.4 billion at September 30, 2002, and $1.5 billion at December 31, 2001. Included in the allowance for loan losses at September 30, 2002, was $169 million related to $437 million of impaired loans. The remaining impaired loans were recorded at or below either the fair value of collateral or the present value of expected future cash flows. In the first nine months of 2002, the average recorded investment in impaired loans was $1.5 billion, and $18 million of interest income was recognized on impaired loans. This income was recognized using the cash-basis method of accounting.

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Past Due LoansAccruing loans 90 days or more past due, excluding loans that are classified as held for sale, declined 18 percent from December 31, 2001, to $235 million at September 30, 2002. Of these past due loans at September 30, 2002, $30 million were commercial loans or commercial real estate loans and $205 million were consumer loans.

Net Charge-offsNet charge-offs of $923 million in the first nine months of 2002 increased 65 percent from $559 million in the first nine months of 2001, due mainly to net charge-offs of $263 million in the telecommunications sector, $123 million related to Argentina, $57 million related to an energy services company, and charge-offs from the former Wachovia. As a percentage of average net loans, net charge-offs were 0.80 percent of average net loans, in the first nine months of 2002, up 20 basis points from the first nine months of 2001. We expect net charge-offs to be at the mid- to high-end of a 60 basis point to 80 basis point range for the full year 2002.

Provision and Allowance for Loan LossesThe provision for loan losses of $1.2 billion in the first nine months of 2002 declined $395 million or 25 percent from the same period in 2001. The provision was higher a year ago primarily due to steps we took in the third quarter of 2001 to reduce the risk inherent in a larger loan portfolio resulting from the merger, as well as to address risk in our loan portfolio driven by a weakened economic environment. In the first nine months of 2002, we continued to mitigate risk and strengthen our balance sheet by transferring many at-risk credits, including a substantial amount of emerging telecommunications sector loans, to held for sale. The provision for loan losses in the first nine months of 2002 included $199 million associated with the transfer of $703 million of exposure, largely in emerging telecommunications exposure, to held for sale. The emerging telecommunications sector includes competitive local exchange carriers; affiliated wireless, broadband providers; and data centers. The provision for loan losses in the first nine months of 2001 included $281 million related to loans sold or transferred to held for sale and $726 million in excess of charge-offs. The provision related to the transfer of loans to held for sale was recorded to reduce the carrying value of these loans to their respective fair values.

     Loans transferred to held for sale are carried at the lower of cost or market value, and accordingly, they are not included in the evaluation of the adequacy of the allowance for loan losses subsequent to the transfer.

     The allowance for loan losses was $2.8 billion at September 30, 2002, and $3.0 billion at December 31, 2001. The allowance was 1.81 percent of net loans at September 30, 2002, and 1.83 percent of net loans at December 31, 2001. As a percentage of nonperforming loans, the allowance was 163 percent at September 30, 2002, and 195 percent at December 31, 2001.

     The allowance for loan losses is maintained at a level that we believe is adequate to absorb probable losses inherent in the loan portfolio as of the date of the consolidated financial statements. We employ a variety of tools as well as seasoned judgment in assessing the adequacy of the allowance.

     Our methodology for assessing the adequacy of the allowance establishes both an allocated and an unallocated component. The allocated component of the allowance for commercial loans is based principally on current loan grades and historical loss rates. For consumer loans, it is based on loan payment status and historical loss rates.

     The unallocated component of the allowance represents the results of analyses that estimate probable losses inherent in the portfolio that are not fully captured in the allocated allowance. These analyses include industry concentrations, model imprecision and the estimated impact of current economic conditions on historical loss rates. We continuously monitor trends in loan portfolio qualitative and quantitative factors, including trends in the levels of past due, criticized and nonperforming loans. The trends in these factors are used to evaluate the reasonableness of the unallocated component.

     The distribution of the allowance into an allocated and unallocated component does not diminish the fact that the entire allowance is available to absorb credit losses in the loan portfolio. Our principal focus is, therefore, on the adequacy of the total allowance for loan losses. As a result, future material shifts between the allocated and unallocated components of the allowance are possible.

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     A management committee headed by our chief risk management officer and composed of the risk management officers of our operating segments, our principal accounting officer, the senior officer from our independent credit risk review unit and other experienced credit risk professionals is responsible for a comprehensive review and formal approval of the allowance for loan losses at the end of each quarter.

Loans Held for SaleAt September 30, 2002, loans held for sale amounted to $6.3 billion and $7.8 billion at December 31, 2001. We have made significant progress in reducing the $1.5 billion portfolio of post-merger overlapping loans and loans representing areas of perceived higher risk, primarily in the textile, technology and telecommunications, commercial real estate and asbestos-related sectors, which we transferred to held for sale in the third quarter of 2001. Remaining loans related to this transfer had a net carrying value of $109 million at September 30, 2002.

     As part of our ongoing portfolio management activities, we transferred a net $1.9 billion of loans to held for sale in the third quarter of 2002, including $1.4 billion of consumer home equity loans. All of the home equity loans were subsequently sold early in the fourth quarter of 2002. In addition, we transferred $467 million of largely telecommunications loans and $236 million of unfunded commitments to held for sale. In connection with this transfer to held for sale, these loans were written down to the lower of cost or market value, and in aggregate these loans were recorded in held for sale at 46 percent of par. Following these third quarter credit actions, the telecommunications portfolio, excluding held for sale, at September 30, 2002, contained $3.7 billion of exposure, of which $1.0 billion was outstanding. Approximately 64 percent of the $3.7 billion was investment grade or equivalent. The $3.7 billion also included $315 million of emerging telecommunications exposure, of which $148 million was outstanding. Our telecommunications exposure, excluding loans held for sale, has declined $870 million since year-end 2001. Since September 30, 2002, our telecommunications loan exposure, excluding loans held for sale, has declined an additional $400 million through normal maturities of loan facilities.

     In the first nine months of 2002, we sold or securitized $16.8 billion in loans out of the held for sale portfolio. Of this total, $1.1 billion were commercial loans and $15.7 billion were consumer loans, primarily residential mortgages and prime equity lines. Substantially all of the consumer loan sales and securitizations represented normal flow business, which is originated directly into the held for sale portfolio. Of the loans sold, $62 million were nonperforming. Additionally, in the third quarter of 2002, we transferred $3.6 billion of student loans back to the loan portfolio.

     In addition to the above activity, in the first nine months of 2002, we sold $1.3 billion of loans directly out of the portfolio. Of these nonflow loans, $1.0 billion were performing and $273 million were nonperforming at the time of the sale. Loan sales are recorded as sales directly out of the loan portfolio in situations where the sale is closed in the same period in which the decision to sell was made. We will continue to look for market opportunities to reduce risk in the loan portfolio by either selling loans directly out of the loan portfolio or by designating loans as held for sale.

Funding Sources

Core DepositsCore deposits of $174 billion at September 30, 2002, increased 3 percent from December 31, 2001, despite continued runoff in higher cost consumer certificate of deposit balances as we focus on increasing the proportion of low-cost core deposits, which grew to $126 billion at September 30, 2002, up 9 percent from December 31, 2001.

     In both the first nine months of 2002 and the first nine months of 2001, average noninterest-bearing deposits were 23 percent of average core deposits. The portion of core deposits in higher-rate, other consumer time deposits was 20 percent at September 30, 2002, and 23 percent at December 31, 2001. Other consumer time and other noncore deposits usually pay higher rates than savings and transaction accounts, but they generally are not available for immediate withdrawal. They are also less expensive to service.

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Purchased FundsAverage purchased funds, which include wholesale borrowings with maturities of 12 months or less, were $59 billion in the first nine months of 2002, an increase of 2 percent from $58 billion in the first nine months of 2001. Our current trading strategy resulted in growth in securities sold under repurchase agreements to fund trading positions. Purchased funds were $55 billion at September 30, 2002, and $63 billion at December 31, 2001.

Long-term DebtLong-term debt of $40 billion at September 30, 2002, declined 5 percent from December 31, 2001, due to scheduled maturities. In the fourth quarter of 2002, scheduled maturities of long-term debt amount to $2.6 billion. We anticipate either extending the maturities of these obligations or replacing the maturing obligations.

     Long-term debt included $3 billion of trust capital securities at both September 30, 2002, and December 31, 2001. Subsidiary trusts issued these capital securities and used the proceeds to purchase junior subordinated debentures from the parent company. These capital securities are considered tier 1 capital for regulatory purposes.

     In the third quarter of 2002, we issued $2.0 billion of floating rate, collateralized notes that are secured by asset-backed securities.

     Wachovia Bank has available a global note program for the issuance of up to $45 billion of senior or subordinated notes. The sale of any notes under this program will depend on future market conditions, funding needs and other factors.

     Under a current shelf registration statement with the Securities and Exchange Commission, we have $11 billion of senior or subordinated debt securities, common stock or preferred stock available for issuance. In addition we have available for issuance up to $4 billion under a medium-term note program covering senior or subordinated debt securities. The sale of debt or equity securities will depend on future market conditions, funding needs and other factors.

Stockholders’ EquityThe management of capital in a regulated banking environment requires a balance between maximizing leverage and return on equity while maintaining sufficient capital levels and related ratios to satisfy regulatory requirements. Our goal is to generate attractive returns on equity to our stockholders while maintaining sufficient regulatory capital ratios.

     Stockholders’ equity of $32 billion at September 30, 2002, increased 13 percent from December 31, 2001. Common shares outstanding amounted to 1.4 billion at both September 30, 2002, and December 31, 2001. At September 30, 2002, we had authority to repurchase up to 102 million shares of our common stock.

     At September 30, 2002, we had an equity forward contract outstanding involving 3 million shares at an aggregate cost of $100 million and forward purchase contracts outstanding involving 33 million shares at an aggregate cost of $1.2 billion. In October 2002, we settled the equity forward contract and one forward purchase contract. The aggregate number of shares settled was 12 million, at an aggregate cost of $536 million. After settlement of those contracts, we have one outstanding forward purchase contract involving 24 million shares at an aggregate cost of $753 million, which we plan to settle in 2003.

     In calculating diluted earnings per share, the premium component of the forward price on equity forward contracts is subtracted in calculating income available to common stockholders. For forward purchase contracts, diluted shares include the share equivalent of the excess of the forward price over the current market price of the shares. In the third quarter of 2002, the premium component of the equity forward contract was anti-dilutive, and accordingly, was not included in the earnings per share calculation.

     In the third quarter of 2002, we entered into transactions involving the simultaneous sale of put options and the purchase of call options on 4.9 million shares of our common stock with expiration dates from late October 2003 to mid-November 2003. We entered into these collar transactions to manage the potential dilution associated with employee stock options. The put options were sold to offset the cost of purchasing the call options.

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     We paid $1.0 billion in dividends to common stockholders in the first nine months of 2002 and $708 million in the first nine months of 2001. This represented a dividend payout ratio on cash earnings of 32.46 percent in the first nine months of 2002 and 41.14 percent in the first nine months of 2001.

     In connection with the Wachovia merger, we issued 97 million shares of Dividend Equalization Preferred Shares (DEPs), which were recorded at their fair value as of September 1, 2001, of 24 cents per share or $23 million for shares issued through December 31, 2001. A dividend of four cents per DEP share, or $3 million, was paid to holders of the DEPs in the third quarter of 2002 representing the difference between the Wachovia dividend paid to common stockholders in the third quarter of 2002 of 26 cents per share and the last common stock dividend paid by the former Wachovia of 30 cents per share. Since September 1, 2001, DEPs dividends of $21 million, or 22 cents per DEP share, have been paid.

     In connection with preferred stock issued by The Money Store, as discussed in theIncome Taxessection, Wachovia agreed that it could declare or pay a dividend on our common stock only after The Money Store quarterly dividends of an estimated $1.8 million have been paid in full on that preferred stock for each quarterly dividend period occurring prior to the proposed common stock dividend.

Subsidiary DividendsWachovia Bank is the largest source of parent company dividends. Capital requirements established by regulators limit dividends that this subsidiary and certain other of our subsidiaries can pay. Under these and other limitations, which include an internal requirement to maintain all deposit-taking banks at the well-capitalized level, at September 30, 2002, our subsidiaries had $1.1 billion available for dividends that could be paid without prior regulatory approval. Our subsidiaries paid $689 million in dividends to the parent company in the first nine months of 2002.

Regulatory CapitalOur tier 1 and total capital ratios were 8.11 percent and 12.02 percent, respectively, at September 30, 2002, and 7.04 percent and 11.08 percent, respectively, at December 31, 2001. Our leverage ratio at September 30, 2002, was 6.82 percent and at December 31, 2001, 6.19 percent. At September 30, 2002, our deposit-taking bank subsidiaries met the capital and leverage ratio requirements for well capitalized banks. The 107 basis point improvement in our tier 1 capital ratio is ahead of our year-end 2002 goal of achieving an 8.00 percent tier 1 capital ratio.

Off-Balance Sheet Profile

     In the normal course of business, we engage in a variety of financial transactions that, under generally accepted accounting principles, either are not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying elements of market, credit and liquidity risk. These transactions fall under two broad categories: corporate transactions and customer transactions. Corporate transactions are designed to diversify our funding sources; reduce our credit, market or liquidity risk; and optimize capital. Customer transactions are executed to facilitate customers’ funding needs or risk management objectives. Within these two categories, there are many types of transactions, which for purposes of the table below, we have grouped into lending commitments, liquidity and credit facilities, asset securitizations, derivatives and other transactions. Refer to our 2001 Annual Report on Form 10-K for a detailed description of each of these types of transactions.

     Lending commitments were $151 billion at both September 30, 2002, and December 31, 2001, as a result of a $1.0 billion increase in commercial loan commitments primarily offset by a $1.1 billion decrease in consumer loan commitments. The increase in commercial loan commitments was primarily driven by an increase in loan demand for commercial loan products in the General Bank, which more than offset a decrease in commercial lending commitments for large corporate customers in the Corporate and Investment Bank.

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Summary of Off-Balance Sheet Exposures
			September 30,		December 31,
(In millions)			2002		2001
Lending commitments			$	150,700		150,800
Liquidity and credit facilities				38,400		45,000
Asset securitizations				12,900		10,000
Derivatives				19,500		11,400
Other transactions
	Leasing transactions			10,100		9,000
	Share repurchase agreements			1,300		1,300
	Principal investing commitments			1,100		1,200
		Total	$	234,000		228,700

     We guarantee the liquidity on substantially all of the commercial paper issued by the conduits that we administer. In addition we provide liquidity guarantees of commercial paper issued by certain large corporate clients. Liquidity and credit facilities decreased $6.6 billion from December 31, 2001, to $38.4 billion at September 30, 2002, primarily due to the lower balances in the commercial paper conduits as a result of initiatives to exit relationships that do not provide adequate returns. In the first nine months of 2002, we purchased $596 million of assets from the conduit pursuant to our credit enhancement agreement compared with $144 million in the same period of 2001.

     In certain cases, we provide purchasers of beneficial interests in our asset securitization transactions with liquidity guarantees. Asset securitizations increased $2.9 billion from December 31, 2001, to $12.9 billion at September 30, 2002, as a result of liquidity provided on 2002 securitizations.

     The derivatives amount included in the above table is the total derivative-related credit risk, as represented by the fair value of all derivatives in a gain position. This amount is recorded on the balance sheet. Derivatives increased $8.1 billion from December 31, 2001, to $19.5 billion at September 30, 2002, as a result of changes in the long-term rate environment. We require collateral for derivative transactions that exceed counterparty thresholds. At September 30, 2002, the total market value-related credit risk for derivative transactions in excess of counterparty thresholds was $2.5 billion and the fair value of collateral exceeded $2.5 billion as of that date. We manage credit risk related to derivative assets through master netting arrangements and by obtaining collateral where appropriate.

Risk Governance and Administration

     Our chief risk management officer reports directly to the chief executive officer and is responsible for credit, market and operational risk governance.

     The chief risk management officer provides loan portfolio, market risk and other information to appropriate management and board of directors oversight committees on a regular basis. These management committees include the Credit Policy Committee and the Asset and Liability Management Committee, both of which meet monthly and are headed by the chief executive officer. The Market Risk Committee, headed by the chief risk management officer, and the Credit & Finance Committee of the board of directors, composed of outside directors, meets bi-monthly.

     Our risk management practices include key elements such as independent checks and balances, formal authority limits, well-defined policies and procedures, quantitative modeling, diversification, active portfolio management and experienced risk management personnel. The policies, strategies and methodologies underlying our management of credit, market, operational, liquidity and interest rate risk are discussed in more detail in our 2001 Annual Report on Form 10-K.

Market Risk ManagementWe trade a variety of debt securities, foreign exchange instruments and derivatives in order to provide customized solutions for the risk management needs of our customers and for proprietary trading. Risk is controlled through the use of value at risk (VAR) methodology with limits approved by the Asset and Liability Management Committee and an active, independent monitoring process. Our 1-day VAR limit for the first nine months of 2002 was $30 million.

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     The VAR methodology uses recent market volatility to estimate within a given level of confidence the maximum trading loss over a period of time that we would expect to incur from an adverse movement in market rates and prices over the period. We calculate 1-day VAR at the 97.5 percent confidence level. The VAR model uses historical data from the most recent 252 trading days. The VAR model is supplemented by stress testing on a daily basis. The analysis captures all financial instruments that are considered trading positions. The total 1-day VAR was $15 million at September 30, 2002, and $11 million at December 31, 2001, and primarily related to interest rate risk and equity risk. The high, low and average VARs in the first nine months of 2002 were $18 million, $9 million and $13 million, respectively.

Interest Rate Risk ManagementManaging interest rate risk is fundamental to banking. The inherent maturity and repricing characteristics of our day-to-day lending and deposit activities create a naturally asset-sensitive structure. By using a combination of financial instruments, we manage the sensitivity of earnings to changes in interest rates within our established policy guidelines. The Asset and Liability Management Committee oversees the interest rate risk management process and approves policy guidelines. Balance sheet management and finance personnel monitor the day-to-day exposure to changes in interest rates in response to loan and deposit flows. They make adjustments within established policy guidelines.

     In analyzing interest rate sensitivity for policy measurement, we compare our forecasted earnings per share in both a “high rate” and “low rate” scenario to base-line scenarios. Our base-line scenario is our estimated most likely path for future short-term interest rates over the next 24 months. The second base-line scenario holds short-term rates flat at their current level over our forecast horizon. The “high rate” and “low rate” scenarios assume gradual 200 basis point increases or decreases in the federal funds rate from the beginning point of each base-line scenario over the next 12-month period. Our policy limit for the maximum negative impact on earnings per share resulting from “high rate” or “low rate” scenarios is 5 percent. The policy limit applies to the “most likely rate” and the “flat rate” base-line scenarios. The policy measurement period is 12 months in length, beginning with the first month of the forecast.

Earnings SensitivityOur “flat rate” scenario holds the federal funds rate constant at 1.75 percent through August 2003. Based on our September 2002 outlook, if interest rates were to follow our “high rate” scenario (i.e., a 200 basis point increase in short-term rates from our “flat rate” scenario), our earnings sensitivity model indicates earnings during the policy measurement period would benefit by 0.6 percent. Typically we analyze a 200 basis point decline for our “low rate” scenario. However, because of the current federal funds rate level, we believe a 50 basis point decline in rates is more appropriate. If rates were to follow the “low rate” scenario relative to “flat rates,” earnings would benefit by 0.5 percent.

     For our “most likely rate” scenario, we believe the market forward implied rate (“market rate”) is the most appropriate. This scenario assumes the federal funds rate declines to 1.50 percent in November 2002 and gradually rises to 2.50 percent by December 2003. Sensitivity to the “market rate” scenario is measured using a gradual 200 basis point increase over a 12-month period. Our model indicates that earnings would be negatively affected by 0.4 percent in a “high rate” scenario relative to the market rate over the policy period. Additionally we measure a scenario where rates gradually decline 50 basis points over a 12-month period relative to the “most likely rate” scenario. The model indicates that earnings would be positively affected in this scenario by 0.1 percent.

     In addition to the standard scenarios used to analyze rate sensitivity over the policy measurement period, we regularly analyze the potential impact of other more extreme interest rate scenarios. These alternate “what if” scenarios may include interest rate paths that are higher, lower and more volatile than those used for policy measurement. We also perform our analysis for time periods that reach beyond the 12-month policy period. For example, based on our September 2002 outlook, if interest rates remain consistent with our “market rate” scenario until December 31, 2002, and then increase by 300 basis points over the course of 2003, earnings in 2003 would decline by 0.9 percent.

     While our interest rate sensitivity modeling assumes that management takes no action, we regularly assess the viability of strategies to reduce unacceptable risks to earnings and we implement such strategies

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when we believe those actions are prudent. As new monthly outlooks become available, we formulate strategies aimed at protecting earnings from the potential negative effects of changes in interest rates.

Accounting and Regulatory Matters

     The following information addresses new or proposed accounting pronouncements related to our industry as well as new or proposed legislation that will continue to have a significant impact on our industry.

Exit CostsIn June 2002 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 146,Accounting for Costs Associated with Exit or Disposal Activities. Under the provisions of SFAS 146, a liability for costs associated with exit or disposal activities is recognized only when a liability has been incurred. Currently, a liability is recognized when management commits to a plan of disposal and the plan meets certain criteria, even though commitment to a plan does not, by itself, necessarily result in a liability.

     Specifically, under SFAS 146, involuntary employee termination costs are recorded on the date that employees are notified, if the period between notification and termination is the lesser of 60 days or the legally required notification period. Otherwise these costs are recognized evenly over the period from notification to termination. Costs associated with terminating a contract, including leases, are recognized when the contract is legally terminated or the benefits of the contract are no longer being realized.

     The standard is effective for exit plans initiated on or after January 1, 2003. The impact that this standard will have on the company is dependent on the number and size of any exit or disposal activities that we undertake, and the effect will be largely on the timing of expense recognition.

Asset ImpairmentIn August 2001 the FASB issued SFAS 144,Accounting for the Impairment or Disposal of Long-Lived Assets, which supercedes both SFAS 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30,Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business. SFAS 144 retains the fundamental provisions in SFAS 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale and resolves significant implementation issues associated with SFAS 121. Unlike SFAS 121, an impairment assessment under SFAS 144 does not result in a write-down of goodwill. Rather, goodwill is evaluated for impairment under SFAS 142, as described below.

     We adopted SFAS 144 on January 1, 2002. The adoption of SFAS 144 for long-lived assets held for use had no material impact on our consolidated financial statements. The provisions of SFAS 144 for assets held for sale or other disposal generally are required to be applied prospectively after the adoption date to newly initiated disposal activities.

Business CombinationsIn July 2001 the FASB issued SFAS 141,Business Combinations, and SFAS 142,Goodwill and Other Intangible Assets. SFAS 141 requires that all business combinations initiated after June 30, 2001, be accounted for using the purchase method. Also under SFAS 141, identified intangible assets acquired in a purchase business combination must be separately valued and recognized on the balance sheet if they meet certain requirements.

     Under the provisions of SFAS 142, goodwill and identified intangible assets with indefinite useful lives are not subject to amortization. Rather they are subject to impairment testing on an annual basis, or more often if events or circumstances indicate that there may be impairment. Identified intangible assets that have a finite useful life are amortized over that life in a manner that reflects the estimated decline in the economic value of the intangible asset and reviewed for impairment when events or circumstances indicate that there may be impairment.

24

     We adopted the provisions of SFAS 141 for business combinations initiated after June 30, 2001, and we adopted the provisions of SFAS 142 on January 1, 2002. Any goodwill and any identified intangible assets determined to have an indefinite useful life that are acquired in a purchase business combination completed after June 30, 2001, are not subject to amortization. Goodwill and intangible assets acquired in purchase business combinations completed before July 1, 2001, were amortized through December 31, 2001. Upon adoption of SFAS 142 on January 1, 2002, all amortization of goodwill and identified intangible assets with indefinite useful lives ceased. The merger of First Union and the former Wachovia was accounted for using the purchase method, and in accordance with the provisions of SFAS 141, the goodwill recorded in connection with the merger was never subject to amortization.

     Under the provisions of SFAS 142, all goodwill and identified intangible assets with an indefinite useful life must be tested for impairment as of January 1, 2002, and annually thereafter. Impairment testing involves assigning tangible and intangible assets, liabilities, identified intangible assets and goodwill to reporting units and comparing the fair value of each reporting unit to its carrying value. If the fair value is less than the carrying value, a further test is required to measure the amount of goodwill impairment. The company’s impairment evaluation as of January 1, 2002, indicated that none of the company’s goodwill was impaired.

ConsolidationsIn June 2002 the FASB issued a proposed interpretation,Consolidation of Certain Special-Purpose Entities.The proposed interpretation would require a company to consolidate special-purpose entities (SPEs) that do not have sufficient independent equity and for which the company is determined to be the primary beneficiary. The FASB is having ongoing discussions regarding this proposed interpretation. We are assessing the potential impact of the proposed interpretation on the company, which may result in consolidation of certain SPEs that are currently not included in our consolidated financial statements. We will not know the actual impact until the FASB finalizes the proposed interpretation, which is currently expected to occur in December 2002.

GuaranteesIn May 2002 the FASB issued a proposed interpretation,Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The proposed interpretation would require a company to record as a liability the fair value of certain guarantees initiated by the company. In addition, the proposed interpretation would require additional disclosure of these and other guarantees in the notes to the financial statements. The recognition provisions of the proposed interpretation are expected to apply to guarantees entered into after December 31, 2002. We are assessing the potential impact of the proposed interpretation on the company, which will most likely include the recording of liabilities associated with certain guarantees.

Accounting for Stock OptionsIn October 2002 the FASB issued a proposed statement,Accounting for Stock-Based Compensation-Transition and Disclosure. The proposed statement would provide alternative methods for transition to the fair value method of accounting for stock options under SFAS 123,Accounting for Stock-Based Compensation.The proposed statement provides three alternatives for transition: the prospective method for new stock options awarded after the date of adoption of the fair value method, which is the method currently required by SFAS 123; the prospective method for all unvested stock options as of the date of adoption of the fair value method; and retroactive restatement of all periods presented. We adopted the fair value method using the prospective method for new stock option awards. The proposed alternative methods would significantly affect the amount of expense recognized in 2002 and possibly also in prior periods. The proposed statement would also amend the disclosure requirements of SFAS 123 to require more prominent disclosures about the method of accounting for stock options and the impact on the results of operations of the method used.

Regulatory MattersOn October 26, 2001, the USA Patriot Act of 2001 became law. This act contains the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 (the IMLAFA). The IMLAFA contains anti-money laundering measures affecting insured depository institutions, broker-dealers and certain other financial institutions. The IMLAFA requires U.S. financial institutions to adopt new policies and procedures to combat money laundering and grants the Secretary of the Treasury broad authority to establish regulations and to impose requirements and

25

restrictions on financial institutions’ operations. As of the date of this filing, the impact of the IMLAFA on our operations is not expected to be material. We are establishing policies and procedures to ensure compliance with the IMLAFA.

     In 1999 the Gramm-Leach-Bliley Financial Modernization Act of 1999 (Modernization Act) became law. The Modernization Act allows bank holding companies meeting management, capital and Community Reinvestment Act standards to engage in a substantially broader range of nonbanking activities than was permissible before enactment, including underwriting insurance and making merchant banking investments in commercial and financial companies. It also allows insurers and other financial services companies to acquire banks; removes various restrictions that applied to bank holding company ownership of securities firms and mutual fund advisory companies; and establishes the overall regulatory structure applicable to bank holding companies that also engage in insurance and securities activities. This part of the Modernization Act became effective in March 2000. In 2000 we became a financial holding company pursuant to the Modernization Act and are thereby permitted to engage in the broader range of activities that the Modernization Act permits.

     The Modernization Act also modifies current law related to financial privacy and community reinvestment. The new privacy provisions generally prohibit financial institutions, including Wachovia, from disclosing nonpublic personal financial information to non-affiliated third parties unless customers have the opportunity to “opt out” of the disclosure.

     On July 30, 2002, President Bush signed the Sarbanes-Oxley Act of 2002 into law. The intent of this law is to reform specific matters pertaining to public accounting oversight, auditor independence and corporate responsibility. Requirements in the act will affect certain of Wachovia’s corporate governance policies and certain of our business lines, such as securities analysis. We do not believe we will need to make material modifications to our corporate governance policies in response to this law nor do we believe this law will negatively affect our financial condition or results of operations.

     Various legislative and regulatory proposals concerning the financial services industry are pending in Congress, the legislatures in states in which we conduct operations and before various regulatory agencies that supervise our operations. Given the uncertainty of the legislative and regulatory process, we cannot assess the impact of any such legislation or regulations on our financial condition or results of operations.

26

Table 1
SELECTED STATISTICAL DATA

	2002							2001
	Third			Second		First		Fourth		Third
(Dollars in millions)	Quarter			Quarter		Quarter		Quarter		Quarter
PROFITABILITY (a)
Return on average common stockholders’ equity		11.63	%		11.52		12.74		10.15		(6.52	)
Net interest margin (b)		3.93			3.96		3.90		3.81		3.58
Fee and other income as % of total revenue		42.86			45.63		45.00		45.33		34.33
Overhead efficiency ratio		66.77			63.28		61.48		66.68		79.67
Effective income tax rate		6.20	%		31.46		32.12		31.91		40.04
CAPITAL ADEQUACY
Tier 1 capital ratio		8.11	%		7.83		7.49		7.04		6.75
Total capital ratio		12.02			11.89		11.56		11.08		10.84
Leverage		6.82	%		6.75		6.51		6.19		7.22
ASSET QUALITY
Allowance as % of loans, net		1.81	%		1.86		1.84		1.83		1.79
Allowance as % of nonperforming assets (c)		149			150		162		175		186
Net charge-offs as % of average loans, net		0.59			0.97		0.83		0.93		0.73
Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale		1.23	%		1.24		1.21		1.13		1.08
OTHER DATA
Employees		80,987			82,686		82,809		84,046		85,534
Financial centers		3,342			3,347		3,362		3,434		3,461
ATMs		4,604			4,617		4,618		4,675		4,698
Common shares outstanding (In millions)		1,373			1,371		1,368		1,362		1,361
Common stock price	$	32.69			38.18		37.08		31.36		31.00
Market capitalization	$	44,887			52,347		50,716		42,701		42,191

(a)  In the second quarter of 2002, certain amounts were changed to reflect the impact of stock option expense related to stock options granted in 2002.

(b)  Tax-equivalent.

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

27

Table 2
SUMMARIES OF INCOME, PER COMMON SHARE AND BALANCE SHEET DATA (a)

				2002								2001
				Third			Second		First			Fourth			Third
(In millions, except per share data)				Quarter			Quarter		Quarter			Quarter			Quarter
SUMMARIES OF INCOME
Interest income				$	3,912			3,894		3,903			4,311			3,944
Interest income (b)				$	3,966			3,948		3,954			4,363			3,988
Interest expense					1,446			1,433		1,477			1,879			2,014
Net interest income (b)					2,520			2,515		2,477			2,484			1,974
Provision for loan losses					435			397		339			381			1,124
Net interest income after provision for loan losses (b)					2,085			2,118		2,138			2,103			850
Securities transactions — portfolio					71			58		(6	)		(16	)		(35	)
Fee and other income					1,819			2,052		2,033			2,076			1,067
Merger-related and restructuring charges					107			143		(8	)		88			85
Other noninterest expense					2,838			2,783		2,777			2,942			2,310
Income (loss) before income taxes (benefits) (b)					1,030			1,302		1,396			1,133			(513	)
Income taxes (benefits)					60			393		432			345			(223	)
Tax-equivalent adjustment					54			54		51			52			44
			Net income (loss)		916			855		913			736			(334	)
Dividends on preferred stock					3			6		6			6			—
			Net income (loss) available to common stockholders	$	913			849		907			730			(334	)
PER COMMON SHARE DATA
Basic					0.67			0.62		0.67			0.54			(0.31	)
Diluted					0.66			0.62		0.66			0.54			(0.31	)
Cash dividends				$	0.26			0.24		0.24			0.24			0.24
Average common shares — Basic					1,362			1,360		1,355			1,352			1,094
Average common shares — Diluted					1,374			1,375		1,366			1,363			1,105
Average common stockholders’ equity
	Quarter-to-date			$	31,098			29,565		28,887			28,528			20,330
	Year-to-date				29,858			29,228		28,887			20,218			17,417
Book value per common share					23.38			22.15		21.04			20.88			20.94
Common stock price
	High				37.47			39.50		37.50			31.90			36.38
	Low				30.51			35.98		30.26			27.90			27.95
	Period-end			$	32.69			38.18		37.08			31.36			31.00
		To earnings ratio (c)			13.18	X		25.28		24.24			21.63			20.39
		To book value			140	%		172		176			150			148
BALANCE SHEET DATA
Assets				$	333,880			324,679		319,853			330,452			325,897
Long-term debt				$	39,758			37,931		39,936			41,733			43,233

(a)  In the second quarter of 2002, certain amounts were changed to reflect the impact of stock option expense related to stock options granted in 2002.

(b)  Tax-equivalent.

(c)  Based on diluted earnings per common share.

28

Table 3
MERGER-RELATED AND RESTRUCTURING CHARGES

			Nine
			Months
			Ended
			Sept. 30,
(In millions)			2002
MERGER-RELATED AND RESTRUCTURING CHARGES — FIRST UNION/WACHOVIA
Merger-related charges
	Personnel costs		$	16
	Occupancy and equipment			55
	Gain on regulatory-mandated branch sales			(121	)
	System conversion costs			114
	Advertising			25
	Other			39
		Total merger-related charges		128
Restructuring charges
	Employee termination benefits			42
	Occupancy and equipment			62
	Contract cancellations			4
	Other			6
		Total restructuring charges		114
		Net merger-related and restructuring charges	$	242

	First Union/
	Wachovia
(In millions)	Merger			Other			Total
ACTIVITY IN THE RESTRUCTURING ACCRUAL
Balance, December 31, 2001	$	63			63			126
Restructuring charge		64			—			64
Cash payments		(42	)		(7	)		(49	)
Balance, March 31, 2002		85			56			141
Restructuring charge		52			—			52
Cash payments		(35	)		(6	)		(41	)
Noncash write-downs		(9	)		—			(9	)
Balance, June 30, 2002		93			50			143
Restructuring charge		(2	)		—			(2	)
Cash payments		(26	)		(14	)		(40	)
Noncash write-downs		(7	)		—			(7	)
Balance, September 30, 2002	$	58			36			94

29

Table 4
BUSINESS SEGMENTS

		2002							2001
		Third			Second		First		Fourth		Third
(In millions)		Quarter			Quarter		Quarter		Quarter		Quarter
GENERAL BANK COMBINED (a)
Net interest income (b)		$	1,730			1,713		1,644		1,639		1,276
Fee and other income			519			508		498		578		434
Intersegment revenue			38			42		40		45		35
	Total revenue		2,287			2,263		2,182		2,262		1,745
Provision for loan losses			114			98		115		130		97
Noninterest expense			1,256			1,231		1,206		1,239		1,015
Income taxes			324			331		304		316		212
Tax-equivalent adjustment			10			10		10		10		10
	Segment earnings	$	583			593		547		567		411
Risk adjusted return on capital			40.85	%		41.03		40.11		42.50		38.71
Cash overhead efficiency ratio			54.88	%		54.42		55.24		54.77		57.64
Economic profit		$	415			416		390		411		289
Average loans, net			101,402			100,832		98,033		97,004		76,383
Average core deposits			141,860			139,649		136,079		133,975		109,641
Economic capital, average		$	5,519			5,554		5,439		5,344		4,298
COMMERCIAL
Net interest income (b)		$	359			354		335		333		223
Fee and other income			60			60		71		65		42
Intersegment revenue			19			20		17		20		14
	Total revenue		438			434		423		418		279
Provision for loan losses			27			24		39		38		25
Noninterest expense			161			150		152		157		116
Income taxes			83			86		74		71		40
Tax-equivalent adjustment			9			9		10		10		9
	Segment earnings	$	158			165		148		142		89
Risk adjusted return on capital			26.20	%		26.10		25.91		26.38		25.20
Cash overhead efficiency ratio			36.90	%		34.65		35.83		37.50		41.28
Economic profit		$	80			81		78		73		44
Average loans, net			39,542			40,239		39,945		40,336		28,758
Average core deposits			16,686			15,134		14,081		13,289		10,794
Economic capital, average		$	2,084			2,160		2,116		2,012		1,331
RETAIL AND SMALL BUSINESS
Net interest income (b)		$	1,371			1,359		1,309		1,306		1,053
Fee and other income			459			448		427		513		392
Intersegment revenue			19			22		23		25		21
	Total revenue		1,849			1,829		1,759		1,844		1,466
Provision for loan losses			87			74		76		92		72
Noninterest expense			1,095			1,081		1,054		1,082		899
Income taxes			241			245		230		245		172
Tax-equivalent adjustment			1			1		—		—		1
	Segment earnings	$	425			428		399		425		322
Risk adjusted return on capital			49.74	%		50.53		49.15		52.24		44.77
Cash overhead efficiency ratio			59.13	%		59.12		59.92		58.69		60.75
Economic profit		$	335			335		312		338		245
Average loans, net			61,860			60,593		58,088		56,668		47,625
Average core deposits			125,174			124,515		121,998		120,686		98,847
Economic capital, average		$	3,435			3,394		3,323		3,332		2,967

(a)  General Bank Combined represents the consolidation of the General Bank’s Commercial and Retail and Small Business lines of business.

(b)  Tax-equivalent.

(Continued)

30

Table 4
BUSINESS SEGMENTS

		2002									2001
		Third			Second			First			Fourth			Third
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
CAPITAL MANAGEMENT COMBINED (a)
Net interest income (b)		$	47			45			44			46			42
Fee and other income			725			783			778			782			652
Intersegment revenue			(18	)		(19	)		(17	)		(19	)		(17	)
	Total revenue		754			809			805			809			677
Provision for loan losses			—			—			—			—			—
Noninterest expense			623			669			676			669			574
Income taxes			48			51			47			52			36
Tax-equivalent adjustment			—			—			—			—			—
	Segment earnings	$	83			89			82			88			67
Risk adjusted return on capital			53.01	%		52.60			48.78			52.07			43.55
Cash overhead efficiency ratio			82.59	%		82.75			83.96			82.79			84.85
Economic profit		$	66			70			64			68			48
Average loans, net			177			186			166			337			269
Average core deposits			1,314			1,269			1,298			1,505			1,535
Economic capital, average			624			675			682			673			611
Assets under management		$	227,486			230,038			230,204			226,470			226,341
RETAIL BROKERAGE SERVICES
Net interest income (b)		$	41			43			44			46			43
Fee and other income			515			564			552			552			460
Intersegment revenue			(17	)		(20	)		(17	)		(17	)		(19	)
	Total revenue		539			587			579			581			484
Provision for loan losses			—			—			—			—			—
Noninterest expense			470			514			523			518			435
Income taxes			26			27			20			26			15
Tax-equivalent adjustment			—			—			—			—			—
	Segment earnings	$	43			46			36			37			34
Risk adjusted return on capital			34.91	%		33.75			26.28			28.52			25.87
Cash overhead efficiency ratio			87.20	%		87.65			90.32			89.44			89.62
Economic profit		$	30			30			22			23			17
Average loans, net			2			2			2			2			1
Average core deposits			198			107			99			75			93
Economic capital, average		$	498			546			549			541			506

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

(b)  Tax-equivalent.

(Continued)

31

Table 4
BUSINESS SEGMENTS

		2002									2001
		Third			Second			First			Fourth			Third
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
ASSET MANAGEMENT
Net interest income (b)		$	5			1			(1	)		(1	)		(3	)
Fee and other income			221			230			237			238			206
Intersegment revenue			(2	)		(1	)		—			—			(1	)
	Total revenue		224			230			236			237			202
Provision for loan losses			—			—			—			—			—
Noninterest expense			166			166			166			163			151
Income taxes			21			23			26			26			18
Tax-equivalent adjustment			—			—			—			—			—
	Segment earnings	$	37			41			44			48			33
Risk adjusted return on capital			111.91	%		124.50			130.88			137.62			122.40
Cash overhead efficiency ratio			74.14	%		72.06			70.56			68.65			74.77
Economic profit		$	33			38			40			43			30
Average loans, net			175			184			164			335			268
Average core deposits			1,116			1,162			1,199			1,430			1,442
Economic capital, average		$	130			132			137			136			108
OTHER
Net interest income (b)		$	1			1			1			1			2
Fee and other income			(11	)		(11	)		(11	)		(8	)		(14	)
Intersegment revenue			1			2			—			(2	)		3
	Total revenue		(9	)		(8	)		(10	)		(9	)		(9	)
Provision for loan losses			—			—			—			—			—
Noninterest expense			(13	)		(11	)		(13	)		(12	)		(12	)
Income taxes			1			1			1			—			3
Tax-equivalent adjustment			—			—			—			—			—
	Segment earnings	$	3			2			2			3			—
Risk adjusted return on capital			—	%		—			—			—			—
Cash overhead efficiency ratio			—	%		—			—			—			—
Economic profit		$	3			2			2			2			1
Average loans, net			—			—			—			—			—
Average core deposits			—			—			—			—			—
Economic capital, average		$	(4	)		(3	)		(4	)		(4	)		(3	)

(Continued)

32

Table 4
BUSINESS SEGMENTS

		2002							2001
		Third			Second		First		Fourth		Third
(In millions)		Quarter			Quarter		Quarter		Quarter		Quarter
WEALTH MANAGEMENT
Net interest income (a)		$	101			99		96		93		62
Fee and other income			126			142		140		136		99
Intersegment revenue			1			2		1		1		—
	Total revenue		228			243		237		230		161
Provision for loan losses			3			7		1		4		2
Noninterest expense			163			166		168		161		114
Income taxes			23			25		25		23		16
Tax-equivalent adjustment			—			—		—		—		—
	Segment earnings	$	39			45		43		42		29
Risk adjusted return on capital			42.47	%		52.69		48.81		50.65		52.92
Cash overhead efficiency ratio			71.41	%		68.42		70.86		69.57		70.65
Economic profit		$	27			35		31		31		22
Average loans, net			8,854			8,632		8,400		8,148		5,680
Average core deposits			10,006			9,879		9,896		9,431		7,313
Economic capital, average		$	345			338		330		318		212

(a)  Tax-equivalent.

(Continued)

33

Table 4
BUSINESS SEGMENTS

		2002									2001
		Third			Second			First			Fourth			Third
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
CORPORATE AND INVESTMENT BANK COMBINED (a)
Net interest income (b)		$	611			589			589			687			507
Fee and other income			348			495			498			419			(218	)
Intersegment revenue			(20	)		(24	)		(18	)		(19	)		(16	)
	Total revenue		939			1,060			1,069			1,087			273
Provision for loan losses			317			293			222			254			126
Noninterest expense			508			521			521			550			485
Income taxes (benefits)			27			66			96			86			(147	)
Tax-equivalent adjustment			18			27			25			22			17
	Segment earnings (loss)	$	69			153			205			175			(208	)
Risk adjusted return on capital			11.92	%		15.05			14.53			13.30			(10.50	)
Cash overhead efficiency ratio			54.11	%		49.15			48.73			50.64			n/m
Economic profit		$	17			74			68			27			(359	)
Average loans, net			40,250			41,580			43,342			46,235			42,069
Average core deposits			12,832			12,207			12,758			12,625			10,479
Economic capital, average		$	7,145			7,372			7,803			8,288			6,328
CORPORATE BANKING
Net interest income (b)		$	432			419			439			491			365
Fee and other income			302			280			271			208			186
Intersegment revenue			(13	)		(16	)		(13	)		(14	)		(10	)
	Total revenue		721			683			697			685			541
Provision for loan losses			318			293			222			248			125
Noninterest expense			270			266			267			295			248
Income taxes			51			47			78			54			58
Tax-equivalent adjustment			1			1			1			1			—
	Segment earnings	$	81			76			129			87			110
Risk adjusted return on capital			17.77	%		15.74			15.35			12.76			15.10
Cash overhead efficiency ratio			37.50	%		38.97			38.28			43.20			45.59
Economic profit		$	83			60			58			11			31
Average loans, net			37,118			38,205			39,689			42,307			38,082
Average core deposits			10,101			9,619			9,875			9,784			7,925
Economic capital, average		$	4,901			5,054			5,395			5,734			3,975

(a)  Corporate and Investment Bank Combined represents the consolidation of the Corporate and Investment Bank’s Corporate Banking, Investment Banking and Principal Investing lines of business.

(b)  Tax-equivalent.

(Continued)

34

Table 4
BUSINESS SEGMENTS

		2002									2001
		Third			Second			First			Fourth			Third
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
INVESTMENT BANKING
Net interest income (b)		$	180			169			150			193			151
Fee and other income			75			257			317			232			181
Intersegment revenue			(7	)		(8	)		(5	)		(5	)		(6	)
	Total revenue		248			418			462			420			326
Provision for loan losses			(1	)		—			—			6			1
Noninterest expense			233			249			248			248			228
Income taxes (benefits)			(12	)		37			53			41			15
Tax-equivalent adjustment			17			26			24			21			17
	Segment earnings	$	11			106			137			104			65
Risk adjusted return on capital			5.69	%		32.92			41.37			30.52			25.39
Cash overhead efficiency ratio			93.19	%		59.76			53.69			58.98			69.96
Economic profit		$	(16	)		71			100			66			34
Average loans, net			3,132			3,375			3,653			3,887			3,969
Average core deposits			2,731			2,588			2,883			2,841			2,554
Economic capital, average		$	1,283			1,311			1,335			1,417			1,012
PRINCIPAL INVESTING
Net interest income (b)		$	(1	)		1			—			3			(9	)
Fee and other income			(29	)		(42	)		(90	)		(21	)		(585	)
Intersegment revenue			—			—			—			—			—
	Total revenue		(30	)		(41	)		(90	)		(18	)		(594	)
Provision for loan losses			—			—			—			—			—
Noninterest expense			5			6			6			7			9
Income tax benefits			(12	)		(18	)		(35	)		(9	)		(220	)
Tax-equivalent adjustment			—			—			—			—			—
	Segment loss	$	(23	)		(29	)		(61	)		(16	)		(383	)
Risk adjusted return on capital			(9.57)	%		(11.69	)		(23.02	)		(5.43	)		(113.43	)
Cash overhead efficiency ratio			n/m	%		n/m			n/m			n/m			n/m
Economic profit		$	(50	)		(57	)		(90	)		(50	)		(424	)
Average loans, net			—			—			—			41			18
Average core deposits			—			—			—			—			—
Economic capital, average		$	961			1,007			1,073			1,137			1,341

(Continued)

35

Table 4
BUSINESS SEGMENTS

		2002									2001
		Third			Second			First			Fourth			Third
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
PARENT
Net interest income (a)		$	31			69			104			19			87
Fee and other income			172			182			113			145			69
Intersegment revenue			(1	)		(1	)		(6	)		(8	)		(2	)
	Total revenue		202			250			211			156			154
Provision for loan losses			1			(1	)		1			(7	)		19
Noninterest expense			288			196			206			323			122
Income tax benefits			(322	)		(26	)		(43	)		(107	)		(3	)
Tax-equivalent adjustment			26			17			16			20			17
	Segment earnings (loss)	$	209			64			31			(73	)		(1	)
Risk adjusted return on capital			49.61	%		26.08			20.75			14.80			18.66
Cash overhead efficiency ratio			67.24	%		13.83			18.29			45.75			9.82
Economic profit		$	234			94			61			18			34
Average loans, net			993			3,855			7,123			11,115			8,625
Average core deposits			1,440			1,777			2,781			3,507			2,527
Economic capital, average		$	2,396			2,493			2,572			2,474			1,961

(a)  Tax-equivalent.

(Continued)

36

Table 4
BUSINESS SEGMENTS

			Three Months Ended September 30, 2002
																	Net Merger-
											Corporate						Related
											and						and
			General			Capital			Wealth		Investment						Restructuring
(In millions)			Bank			Management			Management		Bank			Parent			Charges (b)			Total
CONSOLIDATED
Net interest income (a)			$	1,730			47			101		611			31			(54	)		2,466
Fee and other income				519			725			126		348			172			—			1,890
Intersegment revenue				38			(18	)		1		(20	)		(1	)		—			-
		Total revenue		2,287			754			228		939			202			(54	)		4,356
Provision for loan losses				114			—			3		317			1			—			435
Noninterest expense				1,256			623			163		508			288			107			2,945
Income taxes (benefits)				324			48			23		27			(322	)		(40	)		60
Tax-equivalent adjustment				10			—			—		18			26			(54	)		-
		Net income		583			83			39		69			209			(67	)		916
	Dividends on preferred stock			—			—			—		—			3			—			3
		Net income available to common stockholders	$	583			83			39		69			206			(67	)		913
Risk adjusted return on capital				40.85	%		53.01			42.47		11.92			49.61			—			29.77
Cash overhead efficiency ratio				54.88	%		82.59			71.41		54.11			67.24			—			60.87
Economic profit			$	415			66			27		17			234			—			759
Average loans, net				101,402			177			8,854		40,250			993			—			151,676
Average core deposits				141,860			1,314			10,006		12,832			1,440			—			167,452
Economic capital, average			$	5,519			624			345		7,145			2,396			—			16,029
			Three Months Ended September 30, 2001
																	Net Merger-
											Corporate						Related
											and						and
			General			Capital			Wealth		Investment						Restructuring
(In millions)			Bank			Management			Management		Bank			Parent			Charges (b)			Total
CONSOLIDATED
Net interest income (a)			$	1,276			42			62		507			87			(44	)		1,930
Fee and other income				434			652			99		(218	)		69			(4	)		1,032
Intersegment revenue				35			(17	)		—		(16	)		(2	)		—			—
		Total revenue		1,745			677			161		273			154			(48	)		2,962
Provision for loan losses				97			—			2		126			19			880			1,124
Noninterest expense				1,015			574			114		485			122			85			2,395
Income taxes (benefits)				212			36			16		(147	)		(3	)		(337	)		(223	)
Tax-equivalent adjustment				10			—			—		17			17			(44	)		—
		Net income (loss)	$	411			67			29		(208	)		(1	)		(632	)		(334	)
Risk adjusted return on capital				38.71	%		43.55			52.92		(10.50	)		18.66			—			13.00
Cash overhead efficiency ratio				57.64	%		84.85			70.65		n/m			9.82			—			72.86
Economic profit			$	289			48			22		(359	)		34			—			34
Average loans, net				76,383			269			5,680		42,069			8,625			—			133,026
Average core deposits				109,641			1,535			7,313		10,479			2,527			—			131,495
Economic capital, average			$	4,298			611			212		6,328			1,961			—			13,410

(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.

(Continued)

37

Table 4
BUSINESS SEGMENTS

		Nine Months Ended
		September 30,
(In millions)		2002			2001
GENERAL BANK COMBINED (a)
Net interest income (b)		$	5,087			3,498
Fee and other income			1,525			1,146
Intersegment revenue			120			98
	Total revenue		6,732			4,742
Provision for loan losses			327			295
Noninterest expense			3,693			2,835
Income taxes			959			533
Tax-equivalent adjustment			30			25
	Segment earnings	$	1,723			1,054
Risk adjusted return on capital			40.67	%		39.58
Cash overhead efficiency ratio			54.84	%		58.99
Economic profit		$	1,221			779
Average loans, net			100,101			68,292
Average core deposits			139,217			101,864
Economic capital, average		$	5,504			3,777
COMMERCIAL
Net interest income (b)		$	1,048			573
Fee and other income			191			100
Intersegment revenue			56			40
	Total revenue		1,295			713
Provision for loan losses			90			57
Noninterest expense			463			313
Income taxes			243			95
Tax-equivalent adjustment			28			24
	Segment earnings	$	471			224
Risk adjusted return on capital			26.07	%		25.21
Cash overhead efficiency ratio			35.79	%		43.42
Economic profit		$	239			108
Average loans, net			39,907			24,816
Average core deposits			15,310			9,848
Economic capital, average		$	2,120			1,096
RETAIL AND SMALL BUSINESS
Net interest income (b)		$	4,039			2,925
Fee and other income			1,334			1,046
Intersegment revenue			64			58
	Total revenue		5,437			4,029
Provision for loan losses			237			238
Noninterest expense			3,230			2,522
Income taxes			716			438
Tax-equivalent adjustment			2			1
	Segment earnings	$	1,252			830
Risk adjusted return on capital			49.81	%		45.46
Cash overhead efficiency ratio			59.38	%		61.74
Economic profit		$	982			671
Average loans, net			60,194			43,476
Average core deposits			123,907			92,016
Economic capital, average		$	3,384			2,681

(a)  General Bank Combined represents the consolidation of the General Bank’s Consumer and Commercial and Small Business lines of business.

(b)  Tax-equivalent.

(Continued)

38

Table 4
BUSINESS SEGMENTS

		Nine Months Ended
		September 30,
(In millions)		2002			2001
CAPITAL MANAGEMENT COMBINED (a)
Net interest income (b)		$	136			120
Fee and other income			2,286			2,017
Intersegment revenue			(54	)		(51	)
	Total revenue		2,368			2,086
Provision for loan losses			—			—
Noninterest expense			1,968			1,732
Income taxes			146			122
Tax-equivalent adjustment			—			—
	Segment earnings	$	254			232
Risk adjusted return on capital			51.43	%		51.43
Cash overhead efficiency ratio			83.11	%		83.02
Economic profit		$	200			178
Average loans, net			177			170
Average core deposits			1,294			1,656
Economic capital, average			660			604
Assets under management		$	227,486			226,341
RETAIL BROKERAGE SERVICES
Net interest income (b)		$	128			126
Fee and other income			1,631			1,432
Intersegment revenue			(54	)		(52	)
	Total revenue		1,705			1,506
Provision for loan losses			—			—
Noninterest expense			1,507			1,328
Income taxes			73			60
Tax-equivalent adjustment			—			—
	Segment earnings	$	125			118
Risk adjusted return on capital			31.57	%		30.55
Cash overhead efficiency ratio			88.41	%		88.13
Economic profit		$	82			71
Average loans, net			3			1
Average core deposits			136			92
Economic capital, average		$	531			514

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

(b)  Tax-equivalent.

(Continued)

39

Table 4
BUSINESS SEGMENTS

		Nine Months Ended
		September 30,
(In millions)		2002			2001
ASSET MANAGEMENT
Net interest income (b)		$	5			(10	)
Fee and other income			688			620
Intersegment revenue			(3	)		(1	)
	Total revenue		690			609
Provision for loan losses			—			—
Noninterest expense			498			436
Income taxes			70			60
Tax-equivalent adjustment			—			—
	Segment earnings	$	122			113
Risk adjusted return on capital			122.50	%		162.92
Cash overhead efficiency ratio			72.22	%		71.53
Economic profit		$	111			105
Average loans, net			174			169
Average core deposits			1,158			1,564
Economic capital, average		$	133			93
OTHER
Net interest income (b)		$	3			4
Fee and other income			(33	)		(35	)
Intersegment revenue			3			2
	Total revenue		(27	)		(29	)
Provision for loan losses			—			—
Noninterest expense			(37	)		(32	)
Income taxes			3			2
Tax-equivalent adjustment			—			—
	Segment earnings	$	7			1
Risk adjusted return on capital			(247.50)	%		(56.45	)
Cash overhead efficiency ratio			141.26	%		106.61
Economic profit		$	7			2
Average loans, net			—			—
Average core deposits			—			—
Economic capital, average		$	(4	)		(3	)

(Continued)

40

Table 4
BUSINESS SEGMENTS

		Nine Months Ended
		September 30,
(In millions)		2002			2001
WEALTH MANAGEMENT
Net interest income (a)		$	296			158
Fee and other income			408			258
Intersegment revenue			4			—
	Total revenue		708			416
Provision for loan losses			11			2
Noninterest expense			497			284
Income taxes			73			45
Tax-equivalent adjustment			—			—
	Segment earnings	$	127			85
Risk adjusted return on capital			47.92	%		64.96
Cash overhead efficiency ratio			70.20	%		67.82
Economic profit		$	93			66
Average loans, net			8,630			4,837
Average core deposits			9,928			6,623
Economic capital, average		$	338			168

(a)  Tax-equivalent.

(Continued)

41

Table 4
BUSINESS SEGMENTS

		Nine Months Ended
		September 30,
(In millions)		2002			2001
CORPORATE AND INVESTMENT BANKING COMBINED (a)
Net interest income (b)		$	1,789			1,445
Fee and other income			1,341			505
Intersegment revenue			(62	)		(43	)
	Total revenue		3,068			1,907
Provision for loan losses			832			289
Noninterest expense			1,550			1,467
Income taxes (benefits)			189			(4	)
Tax-equivalent adjustment			70			41
	Segment earnings	$	427			114
Risk adjusted return on capital			13.86	%		4.34
Cash overhead efficiency ratio			50.52	%		76.72
Economic profit		$	159			(354	)
Average loans, net			41,713			41,986
Average core deposits			12,599			10,041
Economic capital, average		$	7,437			6,175
CORPORATE BANKING
Net interest income (b)		$	1,290			1,081
Fee and other income			853			535
Intersegment revenue			(42	)		(26	)
	Total revenue		2,101			1,590
Provision for loan losses			833			291
Noninterest expense			803			736
Income taxes			176			193
Tax-equivalent adjustment			3			—
	Segment earnings	$	286			370
Risk adjusted return on capital			16.26	%		16.53
Cash overhead efficiency ratio			38.23	%		46.07
Economic profit		$	201			126
Average loans, net			38,328			37,676
Average core deposits			9,866			7,646
Economic capital, average		$	5,115			3,718

(a)  Corporate and Investment Bank Combined represents the consolidation of the Corporate and Investment Bank’s Corporate Banking, Investment Banking and Principal Investing lines of business.

(b) Tax-equivalent.

(Continued)

42

Table 4
BUSINESS SEGMENTS

		Nine Months Ended
		September 30,
(In millions)		2002			2001
INVESTMENT BANKING
Net interest income (b)		$	499			394
Fee and other income			649			656
Intersegment revenue			(20	)		(17	)
	Total revenue		1,128			1,033
Provision for loan losses			(1	)		(2	)
Noninterest expense			730			705
Income taxes			78			71
Tax-equivalent adjustment			67			41
	Segment earnings	$	254			218
Risk adjusted return on capital			26.77	%		25.96
Cash overhead efficiency ratio			64.65	%		68.19
Economic profit		$	155			116
Average loans, net			3,385			4,304
Average core deposits			2,733			2,395
Economic capital, average		$	1,309			1,107
PRINCIPAL INVESTING
Net interest income (b)		$	—			(30	)
Fee and other income			(161	)		(686	)
Intersegment revenue			—			—
	Total revenue		(161	)		(716	)
Provision for loan losses			—			—
Noninterest expense			17			26
Income tax benefits			(65	)		(268	)
Tax-equivalent adjustment			—			—
	Segment loss	$	(113	)		(474	)
Risk adjusted return on capital			(14.97)	%		(47.00	)
Cash overhead efficiency ratio			n/m	%		n/m
Economic profit		$	(197	)		(596	)
Average loans, net			—			6
Average core deposits			—			—
Economic capital, average		$	1,013			1,350

(Continued)

43

Table 4
BUSINESS SEGMENTS

		Nine Months Ended
		September 30,
(In millions)		2002			2001
PARENT
Net interest income (a)		$	204			229
Fee and other income			467			285
Intersegment revenue			(8	)		(4	)
	Total revenue		663			510
Provision for loan losses			1			100
Noninterest expense			690			299
Income tax benefits			(391	)		(2	)
Tax-equivalent adjustment			59			41
	Segment earnings	$	304			72
Risk adjusted return on capital			31.91	%		21.63
Cash overhead efficiency ratio			31.59	%		13.98
Economic profit		$	389			143
Average loans, net			3,968			8,793
Average core deposits			1,994			2,394
Economic capital, average		$	2,487			1,978

(a)  Tax-equivalent.

(Continued)

44

Table 4
BUSINESS SEGMENTS

			Nine Months Ended September 30, 2002
																	Net Merger-
											Corporate						Related,
											and						Restructuring
			General			Capital			Wealth		Investment						and Other
(In millions)			Bank			Management			Management		Bank			Parent			Charges (b)			Total
CONSOLIDATED
Net interest income (a)			$	5,087			136			296		1,789			204			(159	)		7,353
Fee and other income				1,525			2,286			408		1,341			467			—			6,027
Intersegment revenue				120			(54	)		4		(62	)		(8	)		—			—
		Total revenue		6,732			2,368			708		3,068			663			(159	)		13,380
Provision for loan losses				327			—			11		832			1			—			1,171
Noninterest expense				3,693			1,968			497		1,550			690			242			8,640
Income taxes (benefits)				959			146			73		189			(391	)		(91	)		885
Tax-equivalent adjustment				30			—			—		70			59			(159	)		—
		Net income		1,723			254			127		427			304			(151	)		2,684
	Dividends on preferred stock			—			—			—		—			15			—			15
		Net income applicable to common stockholders	$	1,723			254			127		427			289			(151	)		2,669
Risk adjusted return on capital				40.67	%		51.43			47.92		13.86			31.91			—			27.78
Cash overhead efficiency ratio				54.84	%		83.11			70.20		50.52			31.59			—			58.47
Economic profit			$	1,221			200			93		159			389			—			2,062
Average loans, net				100,101			177			8,630		41,713			3,968			—			154,589
Average core deposits				139,217			1,294			9,928		12,599			1,994			—			165,032
Economic capital, average			$	5,504			660			338		7,437			2,487			—			16,426
			Nine Months Ended September 30, 2001
																	Net Merger-
											Corporate						Related,
											and						Restructuring
			General			Capital			Wealth		Investment						and Other
(In millions)			Bank			Management			Management		Bank			Parent			Charges (b)			Total
CONSOLIDATED
Net interest income (a)			$	3,498			120			158		1,445			229			(107	)		5,343
Fee and other income				1,146			2,017			258		505			285			25			4,236
Intersegment revenue				98			(51	)		—		(43	)		(4	)		—			—
		Total revenue		4,742			2,086			416		1,907			510			(82	)		9,579
Provision for loan losses				295			—			2		289			100			880			1,566
Noninterest expense				2,835			1,732			284		1,467			299			184			6,801
Income taxes (benefits)				533			122			45		(4	)		(2	)		(365	)		329
Tax-equivalent adjustment				25			—			—		41			41			(107	)		—
Net income			$	1,054			232			85		114			72			(674	)		883
Risk adjusted return on capital				39.58	%		51.43			64.96		4.34			21.63			—			20.55
Cash overhead efficiency ratio				58.99	%		83.02			67.82		76.72			13.98			—			65.68
Economic profit			$	779			178			66		(354	)		143			—			812
Average loans, net				68,292			170			4,837		41,986			8,793			—			124,078
Average core deposits				101,864			1,656			6,623		10,041			2,394			—			122,578
Economic capital, average			$	3,777			604			168		6,175			1,978			—			12,702

(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.

45

Table 5
FEE AND OTHER INCOME — CORPORATE AND INVESTMENT BANK (a)

		2002									2001
		Third			Second			First			Fourth			Third
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
CORPORATE BANKING
Lending/Treasury services		$	180			167			162			93			82
Leasing			45			39			41			45			40
International			77			74			68			70			64
	Total		302			280			271			208			186
Intersegment revenue			(13	)		(16	)		(13	)		(14	)		(10	)
	Total Corporate Banking		289			264			258			194			176
INVESTMENT BANKING
Agency			90			149			137			142			57
Fixed income			(33	)		95			163			61			113
Affordable housing			18			13			17			29			11
	Total		75			257			317			232			181
Intersegment revenue			(7	)		(8	)		(5	)		(5	)		(6	)
	Total Investment Banking		68			249			312			227			175
PRINCIPAL INVESTING			(29	)		(42	)		(90	)		(21	)		(585	)
	Total fee and other income — Corporate and Investment Bank	$	328			471			480			400			(234	)

(a)  The aggregate amounts of trading account profits (losses) included in this table in the third, second and first quarters of 2002 and in the fourth and third quarters of 2001 were $(64) million, $34 million, $121 million, $43 million and $66 million, respectively.

46

Table 6
SELECTED RATIOS (a)

		Nine Months Ended
		September 30,					2002						2001
							Third		Second		First		Fourth		Third
		2002			2001		Quarter		Quarter		Quarter		Quarter		Quarter
PERFORMANCE RATIOS (b)
Assets to stockholders’ equity			10.62	X		14.57		10.34		10.64		10.91		11.18		13.17
Return on assets			1.13	%		0.47		1.13		1.09		1.17		0.91		(0.50	)
Return on total stockholders’ equity			12.01	%		6.78		11.68		11.59		12.81		10.22		(6.52	)
DIVIDEND PAYOUT RATIOS ON
Net income (c)
	Common shares		37.95			84.71		39.39		38.71		36.36		44.44		—
	Preferred and common shares		38.32	%		84.71		39.38		39.09		36.54		44.86		—

(a)  In the second quarter of 2002, certain amounts were changed to reflect the impact of stock option expense related to stock options granted in 2002 and to reflect the change in certain average balances.

(b)  Based on average balances and net income.

(c)  Dividend payout ratios are not presented for periods in which there is a net loss.

47

Table 7
SECURITIES (a)

				September 30, 2002
															Gross Unrealized						Average
				1 Year			1-5		5-10		After 10								Amortized		Maturity
(In millions)				or Less			Years		Years		Years		Total		Gains		Losses		Cost		in Years
MARKET VALUE
U.S. Treasury				$	905			7		1		—		913		1		—		912		0.10
U.S. Government agencies					71			33,001		1,200		—		34,272		964		158		33,466		2.41
Asset-backed
	Residual interests				42			274		569		228		1,113		399		—		714		6.36
	Other				524			16,354		8,624		233		25,735		1,078		14		24,671		4.69
State, county and municipal					74			262		569		1,577		2,482		270		14		2,226		16.57
Sundry					227			1,728		3,948		1,653		7,556		162		99		7,493		6.64
			Total market value	$	1,843			51,626		14,911		3,691		72,071		2,874		285		69,482		4.09
MARKET VALUE
Debt securities				$	1,843			51,626		14,911		2,273		70,653		2,860		262		68,055
Equity securities					—			—		—		1,418		1,418		14		23		1,427
			Total market value	$	1,843			51,626		14,911		3,691		72,071		2,874		285		69,482
AMORTIZED COST
Debt securities				$	1,795			50,514		13,649		2,097		68,055
Equity securities					—			—		—		1,427		1,427
			Total amortized cost	$	1,795			50,514		13,649		3,524		69,482
WEIGHTED AVERAGE YIELD
	U.S. Treasury				1.75	%		8.67		8.04		—		1.80
	U.S. Government agencies				6.94			6.27		5.90		—		6.26
	Asset-backed
		Residual interests			10.98			15.89		54.56		15.67		30.00
		Other			5.40			5.81		5.38		8.01		5.68
	State, county and municipal				7.91			8.96		9.44		8.12		8.49
	Sundry				6.53			6.74		6.99		4.96		6.47
	Consolidated				3.87	%		6.20		6.97		8.41		6.33

(a)  At September 30, 2002, all securities were classified as available for sale.

     Securities with an aggregate amortized cost of $39 billion are pledged to secure U.S. Government and other public deposits and for other purposes as required by various statutes or agreements.

     Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Average maturity excludes equity securities and money market funds.

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

     At September 30, 2002, there were forward commitments to purchase securities at a cost that approximates a market value of $4.6 billion, and commitments to sell securities at a cost that approximates a market value of $841 million.

     Gross gains and losses realized on the sale or impairment of debt securities for the nine months ended September 30, 2002, were $268 million and $126 million, respectively, and gross gains and losses realized on equity securities were $10 million and $29 million, respectively.

48

Table 8
LOANS — ON-BALANCE SHEET, AND MANAGED AND SERVICING PORTFOLIOS

			2002						2001
			Third		Second		First		Fourth		Third
(In millions)			Quarter		Quarter		Quarter		Quarter		Quarter
ON-BALANCE SHEET LOAN PORTFOLIO
	COMMERCIAL
	Commercial, financial and agricultural		$	57,899		57,984		60,385		61,258		63,616
	Real estate — construction and other			7,558		8,035		8,137		7,969		7,457
	Real estate — mortgage			16,967		17,349		17,186		17,234		17,156
	Lease financing			22,616		22,044		22,223		21,958		21,625
	Foreign			6,992		7,241		6,920		7,653		7,572
		Total commercial		112,032		112,653		114,851		116,072		117,426
	CONSUMER
	Real estate — mortgage			17,527		19,803		20,901		22,139		25,466
	Installment loans			37,889		35,940		36,073		34,666		35,577
	Vehicle leasing			43		168		345		618		941
		Total consumer		55,459		55,911		57,319		57,423		61,984
		Total loans		167,491		168,564		172,170		173,495		179,410
	Unearned income			9,949		9,764		9,876		9,694		9,730
		Loans, net(on-balance sheet)	$	157,542		158,800		162,294		163,801		169,680
MANAGED PORTFOLIO (a)
COMMERCIAL
On-balance sheet loan portfolio			$	112,032		112,653		114,851		116,072		117,426
Securitized loans — off-balance sheet				2,288		2,318		5,816		5,827		6,613
Loans held for sale included in other assets				1,271		779		962		1,478		1,648
		Total commercial		115,591		115,750		121,629		123,377		125,687
CONSUMER
Real estate — mortgage
	On-balance sheet loan portfolio			17,527		19,803		20,901		22,139		25,466
	Securitized loans included in securities			6,431		4,868		4,181		5,344		2,506
	Loans held for sale included in other assets			2,473		1,387		1,554		2,420		1,687
		Total real estate — mortgage		26,431		26,058		26,636		29,903		29,659
Installment loans
	On-balance sheet loan portfolio			37,889		35,940		36,073		34,666		35,577
	Securitized loans — off-balance sheet			13,164		13,379		13,989		14,095		12,746
	Securitized loans included in securities			11,695		8,918		9,230		9,776		9,460
	Loans held for sale included in other assets			2,513		6,232		4,615		3,865		3,502
		Total installment loans		65,261		64,469		63,907		62,402		61,285
Vehicle leasing — on-balance sheet loan portfolio				43		168		345		618		941
		Total consumer		91,735		90,695		90,888		92,923		91,885
		Total managed portfolio	$	207,326		206,445		212,517		216,300		217,572
SERVICING PORTFOLIO (b)
Commercial			$	53,611		50,001		47,657		42,210		41,394
Consumer			$	2,490		1,773		1,844		2,900		2,807

(a)  The managed portfolio includes the on-balance sheet loan portfolio, loans securitized for which the assets are classified in securities on-balance sheet, loans held for sale that are classified in other assets 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.

49

Table 9
LOANS HELD FOR SALE

		2002									2001
		Third			Second			First			Fourth			Third
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period		$	8,398			7,131			7,763			6,837			5,963
Core business activity
Core business activity, beginning of period			8,225			6,782			6,991			5,613			5,522
Former Wachovia balance, September 1, 2001			—			—			—			—			180
Originations/purchases			7,200			5,611			5,940			7,471			5,189
Transfer of performing loans from loans held for sale, net			(3,639	)		(71	)		(38	)		(2	)		(121	)
Lower of cost or market value adjustments			(36	)		—			(3	)		(11	)		(10	)
Performing loans sold or securitized			(6,823	)		(3,683	)		(5,830	)		(5,655	)		(4,982	)
Nonperforming loans sold			—			—			(11	)		(2	)		—
Other, principally payments			(365	)		(414	)		(267	)		(423	)		(165	)
Core business activity, end of period			4,562			8,225			6,782			6,991			5,613
Portfolio management activity
Portfolio management activity, beginning of period			173			349			772			1,224			441
Former Wachovia balance, September 1, 2001			—			—			—			—			117
Transfers to (from) loans held for sale, net
	Performing loans		1,697			(11	)		10			(30	)		1,154
	Nonperforming loans		201			—			—			24			79
Lower of cost or market value adjustments			19			(8	)		(11	)		(47	)		(5	)
Performing loans sold			(13	)		(49	)		(349	)		(190	)		(195	)
Nonperforming loans sold			(30	)		(10	)		(11	)		(104	)		(88	)
Allowance for loan losses related to loans transferred to loans held for sale			(309	)		—			(4	)		(10	)		(262	)
Other, principally payments			(43	)		(98	)		(58	)		(95	)		(17	)
Portfolio management activity, end of period			1,695			173			349			772			1,224
Balance, end of period (a)		$	6,257			8,398			7,131			7,763			6,837

(a)  Nonperforming loans included in loans held for sale at September 30, June 30, and March 31, 2002, and at December 31, and September 30, 2001, were $115 million, $108 million, $213 million, $228 million and $273 million, respectively.

50

Table 10
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS

			2002									2001
			Third			Second			First			Fourth			Third
(In millions)			Quarter			Quarter			Quarter			Quarter			Quarter
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period			$	2,951			2,986			2,995			3,039			1,760
Provision for loan losses relating to loans transferred to other assets or sold				211			23			14			3			230
Provision for loan losses				224			374			325			378			894
Former Wachovia balance, September 1, 2001				—			—			—			—			766
Allowance relating to loans acquired, transferred to other assets or sold				(315	)		(58	)		(23	)		(47	)		(368	)
Net charge-offs				(224	)		(374	)		(325	)		(378	)		(243	)
Balance, end of period			$	2,847			2,951			2,986			2,995			3,039
as a % of loans, net				1.81	%		1.86			1.84			1.83			1.79
as a % of nonaccrual and restructured loans (a)				163	%		163			177			195			202
as a % of nonperforming assets (a)				149	%		150			162			175			186
LOAN LOSSES
Commercial, financial and agricultural			$	160			319			275			333			192
Real estate — commercial construction and mortgage				5			3			2			2			1
Real estate — residential mortgage				3			1			4			—			1
Installment loans and vehicle leasing				91			86			100			90			80
		Total loan losses		259			409			381			425			274
LOAN RECOVERIES
Commercial, financial and agricultural				17			16			36			30			14
Real estate — commercial construction and mortgage				—			2			—			1			1
Real estate — residential mortgage				—			—			—			—			1
Installment loans and vehicle leasing				18			17			20			16			15
		Total loan recoveries		35			35			56			47			31
		Net charge-offs	$	224			374			325			378			243
Commercial loan net charge-offs as % of average commercial loans, net (b)				0.61	%		1.24			0.97			1.19			0.85
Consumer loan net charge-offs as % of average consumer loans, net (b)				0.56			0.48			0.59			0.48			0.53
Total net charge-offs as % of average loans, net (b)				0.59	%		0.97			0.83			0.93			0.73
NONPERFORMING ASSETS
Nonaccrual loans
	Commercial, financial and agricultural		$	1,440			1,456			1,371			1,294			1,253
	Real estate — commercial construction and mortgage			137			144			128			87			63
	Real estate — residential mortgage			62			60			58			60			75
	Installment loans and vehicle leasing			112			145			128			93			115
		Total nonaccrual loans		1,751			1,805			1,685			1,534			1,506
Foreclosed properties (c)				156			156			159			179			126
		Total nonperforming assets	$	1,907			1,961			1,844			1,713			1,632
Nonperforming loans included in loans held for sale (d)			$	115			108			213			228			273
Nonperforming assets included in loans and in loans held for sale			$	2,022			2,069			2,057			1,941			1,905
as % of loans, net, and foreclosed properties (a)				1.21	%		1.23			1.14			1.04			0.96
as % of loans, net, foreclosed properties and loans in other assets as held for sale (d)				1.23	%		1.24			1.21			1.13			1.08
Accruing loans past due 90 days			$	235			250			275			288			310

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

(b)  Annualized.

(c)  Restructured loans are not significant.

(d)  These ratios reflect nonperforming loans included in loans held for sale. Loans held for sale, which are included in other assets, are recorded at the lower of cost or market value, and accordingly, the amount shown and included in the ratios is net of the transferred allowance for loan losses and the lower of cost or market value adjustments.

51

Table 11
NONACCRUAL LOAN ACTIVITY (a)

		2002									2001
		Third			Second			First			Fourth			Third
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period		$	1,805			1,685			1,534			1,506			1,223
Commercial nonaccrual loan activity
Commercial nonaccrual loans, beginning of period			1,600			1,499			1,381			1,316			1,088
Former Wachovia balance, September 1, 2001			—			—			—			—			209
New nonaccrual loans and advances			528			721			541			668			376
Gross charge-offs			(165	)		(322	)		(277	)		(335	)		(193	)
Transfers to loans held for sale			(134	)		—			—			—			(20	)
Transfers to other real estate owned			(8	)		—			—			(40	)		(5	)
Sales			(31	)		(134	)		(64	)		(64	)		(36	)
Other, principally payments			(213	)		(164	)		(82	)		(164	)		(103	)
	Net commercial nonaccrual loan activity		(23	)		101			118			65			19
Commercial nonaccrual loans, end of period			1,577			1,600			1,499			1,381			1,316
Consumer nonaccrual loan activity
Consumer nonaccrual loans, beginning of period			205			186			153			190			135
Former Wachovia balance, September 1, 2001			—			—			—			—			33
New nonaccrual loans and advances, net			38			35			50			76			75
Transfers to loans held for sale			(58	)		—			—			(22	)		(53	)
Sales and securitizations			(11	)		(16	)		(17	)		(91	)		—
	Net consumer nonaccrual loan activity		(31	)		19			33			(37	)		22
Consumer nonaccrual loans, end of period			174			205			186			153			190
Balance, end of period		$	1,751			1,805			1,685			1,534			1,506

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

52

Table 12
GOODWILL AND OTHER INTANGIBLE ASSETS

		2002						2001
		Third		Second		First		Fourth		Third
(In millions)		Quarter		Quarter		Quarter		Quarter		Quarter
Goodwill		$	10,810		10,728		10,728		10,616		10,496
Deposit base			1,363		1,508		1,661		1,822		2,433
Customer relationships			222		229		237		244		8
Tradename			90		90		90		90		—
	Total goodwill and other intangible assets	$	12,485		12,555		12,716		12,772		12,937

GOODWILL AND OTHER INTANGIBLE ASSETS
   CREATED BY THE FIRST UNION/WACHOVIA MERGER

		2002									2001
		Third			Second			First			Fourth			Third
(In millions)		Quarter			Quarter			Quarter			Quarter			Quarter
Purchase price less former Wachovia ending tangible stockholders’ equity as of September 1, 2001		$	7,466			7,466			7,466			7,466			7,466
Fair value purchase accounting adjustments (a)
Financial assets			836			836			829			829			747
Premises and equipment			167			167			164			132			146
Employee benefit plans			276			276			276			276			276
Financial liabilities			(13	)		(13	)		(13	)		(13	)		(13	)
Other, including income taxes			(154	)		(165	)		(152	)		(169	)		(144	)
	Total fair value purchase accounting adjustments		1,112			1,101			1,104			1,055			1,012
Exit cost purchase accounting adjustments
Personnel and employee termination benefits (b)			152			151			142			94			43
Occupancy and equipment			85			83			83			—			—
Gain on regulatory-mandated branch sales			(47	)		(53	)		(53	)		—			—
Contract cancellations			8			3			2			2			—
Other			53			53			51			45			22
	Total pre-tax exit costs		251			237			225			141			65
Income taxes			(73	)		(68	)		(67	)		(37	)		(9	)
	Total after-tax exit cost purchase accounting adjustments(One-time costs)		178			169			158			104			56
	Total purchase intangibles		8,756			8,736			8,728			8,625			8,534
Deposit base intangible(Net of income taxes)			1,194			1,194			1,194			1,194			1,465
Other identifiable intangibles(Net of income taxes)			209			209			209			209			—
	Goodwill	$	7,353			7,333			7,325			7,222			7,069

(a)  These adjustments represent fair value adjustments in compliance with business combination accounting standards and adjust assets and liabilities of the former Wachovia to their fair value as of September 1, 2001.

(b)  These adjustments represent incremental costs relating to combining the two organizations which are specifically related to the former Wachovia.

53

Table 13
DEPOSITS (a)

		2002						2001
		Third		Second		First		Fourth		Third
(In millions)		Quarter		Quarter		Quarter		Quarter		Quarter
CORE DEPOSITS
Noninterest-bearing		$	44,186		39,558		39,323		43,464		36,382
Savings and NOW accounts			49,305		49,367		47,436		47,175		44,154
Money market accounts			44,644		41,124		41,866		39,022		35,797
Other consumer time			35,562		36,730		37,134		39,649		42,231
	Total core deposits		173,697		166,779		165,759		169,310		158,564
OTHER DEPOSITS
Foreign			7,603		8,262		7,535		9,116		10,181
Other time			6,485		5,622		6,739		9,027		11,804
	Total deposits	$	187,785		180,663		180,033		187,453		180,549

(a)  Certain amounts presented in periods prior to the third quarter of 2002 have been reclassified to conform to the presentation in the third quarter of 2002.

Table 14
TIME DEPOSITS IN AMOUNTS OF $100,000 OR MORE

(In millions)		September 30, 2002
MATURITY OF
3 months or less		$	3,656
Over 3 months through 6 months			1,892
Over 6 months through 12 months			1,185
Over 12 months			3,534
	Total	$	10,267

54

Table 15
LONG-TERM DEBT

				2002							2001
				Third		Second		First			Fourth			Third
(In millions)				Quarter		Quarter		Quarter			Quarter			Quarter
NOTES AND DEBENTURES ISSUED BY THE PARENT COMPANY
	Notes
		4.95% to 7.70%, due 2003 to 2006		$	6,473		6,470		6,468			6,475			4,735
		Floating rate, due 2002 to 2005			1,866		1,866		2,214			2,217			2,669
		Floating rate extendible, due 2005			10		10		10			10			10
	Subordinated notes
		5.625% to 8.15%, due 2002 to 2009			4,428		4,439		4,701			4,702			4,703
		8.00%, due 2009			149		149		149			149			208
		6.605%, due 2025			250		250		250			250			250
		6.30%, Putable/Callable, due 2028			200		200		200			200			200
		Floating rate, due 2003			150		150		150			150			150
	Subordinated debentures
		6.55% to 7.574%, due 2026 to 2035			795		795		795			794			794
Hedge-related basis adjustments					1,094		597		258			389			606
			Total notes and debentures issued by the Parent Company		15,415		14,926		15,195			15,336			14,325
NOTES ISSUED BY SUBSIDIARIES
Notes, primarily notes issued under global bank note programs, varying rates and terms to 2040					7,680		8,636		10,386			11,630			13,686
Subordinated notes
	5.875% to 9.375%, due 2003 to 2006				825		925		925			925			925
	Bank, 5.80% to 7.875%, due 2006 to 2036				2,544		2,544		2,544			2,544			2,548
	6.625% to 8.375%, due 2002 to 2007				572		572		574			574			571
			Total notes issued by subsidiaries		11,621		12,677		14,429			15,673			17,730
OTHER DEBT
Trust preferred securities					2,990		2,990		2,986			2,989			2,993
Collateralized notes, floating rate, due 2006 to 2007					4,391		2,459		2,459			2,489			2,474
4.556% auto securitization financing, due 2008					97		138		164			304			523
Advances from the Federal Home Loan Bank					4,758		4,663		4,823			4,933			4,930
Capitalized leases					22		22		23			25			26
Mortgage notes and other debt of subsidiaries					63		6		7			10			9
Hedge-related basis adjustments					401		50		(150	)		(26	)		223
			Total other debt		12,722		10,328		10,312			10,724			11,178
			Total	$	39,758		37,931		39,936			41,733			43,233

55

Table 16
CHANGES IN STOCKHOLDERS’ EQUITY (a)

				2002									2001
				Third			Second			First			Fourth			Third
(In millions)				Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period				$	30,379			28,785			28,455			28,506			16,144
Comprehensive income
	Net income (loss)				916			855			913			736			(334	)
	Net unrealized gain (loss) on debt and equity securities				780			637			(243	)		(389	)		903
	Net unrealized gain (loss) on derivative financial instruments				257			308			(104	)		(169	)		184
			Total comprehensive income		1,953			1,800			566			178			753
Preferred shares issued					—			—			—			23			—
Purchases of common stock					—			—			—			—			(1,115	)
Common stock issued for
	Stock options and restricted stock				5			96			131			6			13
	Dividend reinvestment plan				—			—			—			15			14
	Acquisitions				51			—			—			—			12,811
Stock options issued in acquisition					—			—			—			—			187
Deferred compensation, net					78			32			(33	)		57			(64	)
Cash dividends
		Preferred shares			(3	)		(6	)		(6	)		(6	)		—
		Common shares			(358	)		(328	)		(328	)		(324	)		(237	)
Balance, end of period				$	32,105			30,379			28,785			28,455			28,506

(a)  In the second quarter of 2002, certain amounts were changed to reflect the impact of stock option expense related to stock options granted in 2002.

56

Table 17
CAPITAL RATIOS

		2002							2001
		Third			Second		First		Fourth		Third
(In millions)		Quarter			Quarter		Quarter		Quarter		Quarter
CONSOLIDATED CAPITAL RATIOS (a)
Qualifying capital
	Tier 1 capital	$	21,001			20,264		19,706		18,999		18,447
	Total capital		31,135			30,778		30,402		29,878		29,641
Adjusted risk-weighted assets			259,057			258,826		262,957		269,726		273,396
Adjusted leverage ratio assets		$	307,890			300,141		302,835		306,745		255,326
Ratios
	Tier 1 capital		8.11	%		7.83		7.49		7.04		6.75
	Total capital		12.02			11.89		11.56		11.08		10.84
	Leverage		6.82			6.75		6.51		6.19		7.22
STOCKHOLDERS’ EQUITY TO ASSETS
	Quarter-end		9.62			9.35		9.00		8.61		8.75
	Average		9.67	%		9.41		9.18		8.95		7.60
BANK CAPITAL RATIOS
Tier 1 capital
	Wachovia Bank, National Association		7.63	%		7.71		7.86		7.55		7.18
	Wachovia Bank of Delaware, National Association		11.97			10.29		9.35		12.51		12.32
Total capital
	Wachovia Bank, National Association		12.12			11.97		12.09		11.68		11.36
	Wachovia Bank of Delaware, National Association		14.59			12.30		10.72		13.98		14.53
Leverage
	Wachovia Bank, National Association		6.61			6.89		6.60		6.29		6.03
	Wachovia Bank of Delaware, National Association		8.03	%		7.16		6.86		7.92		8.38

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

57

Table 18
RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS (a)

			September 30, 2002
						Gross Unrealized								In-			Average
			Notional											effective-			Maturity in
(In millions)			Amount			Gains		Losses (f)			Equity (g)			ness (h)			Years (i)
ASSET HEDGES
Cash flow hedges (b)
	Interest rate swaps		$	46,406			4,495		(230	)		2,636			19			5.95
	Forward purchase commitments			1,000			24		—			14			1			0.21
	Interest rate options			1,000			47		—			29			—			2.67
	Futures			11,025			80		—			50			—			0.25
Fair value hedges (c)
	Interest rate swaps			51			—		(4	)		—			—			4.25
	Forward sale commitments			1,958			—		(18	)		—			7			0.11
	Interest rate options			300			—		(2	)		—			—			1.70
	Futures			117			—		(14	)		—			—			0.25
		Total asset hedges	$	61,857			4,646		(268	)		2,729			27			4.57
LIABILITY HEDGES
Cash flow hedges (d)
	Interest rate swaps		$	34,653			2		(3,151	)		(1,947	)		(10	)		5.16
	Interest rate options			17,700			—		(674	)		(416	)		(3	)		2.54
	Put options on Eurodollar futures			12,000	��		—		(42	)		(26	)		—			0.25
	Futures			10,023			—		(61	)		(38	)		—			0.25
Fair value hedges (e)
	Interest rate swaps			16,222			1,755		—			—			—			4.56
	Interest rate options			300			3		—			—			—			0.71
		Total liability hedges	$	90,898			1,760		(3,928	)		(2,427	)		(13	)		3.34

58

(a)  Includes only derivative financial instruments related to interest rate risk management activities. All of the company’s other derivative financial instruments are classified as trading.

(b)  Receive-fixed interest rate swaps with a notional amount of $44.7 billion, of which $2.3 billion are forward-starting, and with pay rates based on one-to-six month LIBOR are primarily designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of one-to-six month LIBOR-indexed loans. Pay-fixed interest rate swaps with a notional amount of $1.7 billion and with receive rates based on one-month LIBOR are designated as cash flow hedges of securities and have a loss, net of income taxes, of $143 million in accumulated other comprehensive income. An interest rate collar that qualifies as a net purchased option with a notional amount of $1.0 billion is designated as a cash flow hedge of the variability in cash flows related to the forecasted interest rate resets of one-month LIBOR-indexed loans, when one-month LIBOR is below the purchased floor or above the sold cap. Forward purchase commitments of $1.0 billion are designated as a cash flow hedge of the variability of the consideration to be paid in the forecasted purchase of available for sale securities. Eurodollar futures with a notional amount of $11.0 billion are primarily designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of three-month LIBOR-indexed loans.

(c)  Forward sale commitments of $1.3 billion and $670 million are designated as fair value hedges of mortgage loans in the warehouse and fair value hedges of available for sale securities, respectively.

(d)  Derivatives with a notional amount of $66.7 billion are designated as cash flow hedges of the variability in cash flows attributable to the forecasted issuance of fixed rate short-term liabilities that are part of a rollover strategy, primarily repurchase agreements and deposit products. Of this amount, $10.0 billion are Eurodollar futures, $31.2 billion are pay-fixed interest rate swaps with receive rates based on one-to-three month LIBOR, of which $9.1 billion are forward-starting, and $10.7 billion are purchased options on pay-fixed swaps with a strike based on three-month LIBOR. Interest rate collars that qualify as net purchased options with a notional amount of $2.8 billion and collars on Eurodollar futures that qualify as net purchased options with a notional amount of $12.0 billion also hedge the forecasted issuance of fixed rate short-term liabilities that are part of a rollover strategy, when three-month LIBOR is below the sold floor or between the purchased and written caps. Derivatives with a notional amount of $7.7 billion are primarily designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of one-to-three month LIBOR-indexed long-term debt. Of this amount, $4.2 billion are purchased options on pay-fixed swaps with a strike based on three-month LIBOR, and $3.5 billion are pay-fixed interest rate swaps with receive rates based on one-to-three month LIBOR.

(e)  Receive-fixed interest rate swaps with a notional amount of $16.2 billion and with pay rates based primarily on one-to-six month LIBOR are designated as fair value hedges of fixed rate liabilities, primarily CDs, long-term debt and bank notes.

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

(g)  At September 30, 2002, the net unrealized gain on derivatives included in accumulated other comprehensive income, which is a component of stockholders’ equity, was $483 million, net of income taxes. Of this net of tax amount, a $302 million gain represents the effective portion of the net gains (losses) on derivatives that qualify as cash flow hedges, and a $181 million gain relates to terminated and/or redesignated derivatives. As of September 30, 2002, $432 million of net gains, net of income taxes, recorded in accumulated other comprehensive income are expected to be reclassified as interest income or expense during the next twelve months. The maximum length of time over which cash flow hedges are hedging the variability in future cash flows associated with the forecasted transactions is 23.60 years.

(h)  In the nine months ended September 30, 2002, gains in the amount of $14 million were recognized in other fee income representing the ineffective portion of the net gains (losses) on derivatives that qualify as cash flow and fair value hedges. In addition, net interest income in the nine months ended September 30, 2002, was reduced by $7 million representing ineffectiveness of cash flow hedges caused by differences between the critical terms of the derivative and the hedged item, primarily differences in reset dates.

(i)  Estimated maturity approximates average life.

59

Table 19
RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS — EXPECTED MATURITIES

	September 30, 2002
	1 Year			1-2			2-5			5-10			After 10
(In millions)	or Less			Years			Years			Years			Years			Total
CASH FLOW ASSET HEDGES
Notional amount — swaps	$	3,200			969			16,018			26,041			178			46,406
Notional amount — other		10,025			2,000			1,000			—			—			13,025
Weighted average receive rate (a)		6.78	%		5.63			5.55			4.88			5.18			5.15
Weighted average pay rate (a)		1.67	%		1.84			1.86			1.77			2.71			1.74
Unrealized gain (loss)	$	155			67			1,661			2,515			18			4,416
FAIR VALUE ASSET HEDGES
Notional amount — swaps	$	—			—			45			—			6			51
Notional amount — other		1,988			300			77			10			—			2,375
Weighted average receive rate (a)		—	%		—			1.82			—			1.86			1.82
Weighted average pay rate (a)		—	%		—			4.31			—			7.36			4.64
Unrealized gain (loss)	$	(22	)		(2	)		(12	)		(1	)		(1	)		(38	)
CASH FLOW LIABILITY HEDGES
Notional amount — swaps	$	6,905			1,204			14,504			9,253			2,787			34,653
Notional amount — other		14,158			14,385			9,480			1,700			—			39,723
Weighted average receive rate (a)		1.82	%		1.82			1.87			1.81			1.72			1.82
Weighted average pay rate (a)		3.32	%		2.99			5.04			7.27			6.42			5.19
Unrealized gain (loss)	$	(68	)		(444	)		(1,575	)		(1,474	)		(365	)		(3,926	)
FAIR VALUE LIABILITY HEDGES
Notional amount — swaps	$	875			1,900			9,150			3,775			522			16,222
Notional amount — other		300			—			—			—			—			300
Weighted average receive rate (a)		6.81	%		6.63			6.54			6.45			6.66			6.55
Weighted average pay rate (a)		1.85	%		1.83			1.91			1.87			1.77			1.88
Unrealized gain (loss)	$	12			113			919			595			119			1,758

(a)  Weighted average receive and pay rates include the impact of currently effective interest rate swaps and basis swaps only and not the impact of forward-starting interest rate swaps. All of the interest rate swaps have variable pay or receive rates based on one-to-six month LIBOR, and they are the pay or receive rates in effect at September 30, 2002.

60

Table 20
RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS ACTIVITY

	Asset			Liability
(In millions)	Hedges			Hedges			Total
Balance, December 31, 2001	$	45,199			84,129			129,328
Additions		36,025			68,445			104,470
Maturities and amortizations		(13,620	)		(56,255	)		(69,875	)
Terminations		(5,700	)		(5,443	)		(11,143	)
Redesignations and transfers to trading account assets		(47	)		22			(25	)
Balance, September 30, 2002	$	61,857			90,898			152,755

61

WACHOVIA CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES (a)

				THIRD QUARTER 2002							SECOND QUARTER 2002
								Average							Average
						Interest		Rates					Interest		Rates
				Average		Income/		Earned/			Average		Income/		Earned/
(In millions)				Balances		Expense		Paid			Balances		Expense		Paid
ASSETS
Interest-bearing bank balances				$	2,891		14		1.90	%	$	2,613		13		2.02	%
Federal funds sold and securities purchased under resale agreements					10,474		82		3.11			10,835		85		3.18
Trading account assets (b)					16,061		194		4.82			16,248		186		4.57
Securities (b)					62,917		961		6.11			58,282		933		6.40
Loans (b) (c)
	Commercial
		Commercial, financial and agricultural			57,571		1,068		7.36			58,534		1,027		7.03
		Real estate — construction and other			7,809		81		4.10			8,115		84		4.19
		Real estate — mortgage			17,188		228		5.26			17,310		231		5.36
		Lease financing			7,105		189		10.65			7,286		193		10.60
		Foreign			6,879		59		3.41			7,058		60		3.37
			Total commercial		96,552		1,625		6.68			98,303		1,595		6.50
	Consumer
		Real estate — mortgage			18,970		294		6.20			20,104		318		6.34
		Installment loans and vehicle leasing			36,154		652		7.17			36,678		664		7.25
			Total consumer		55,124		946		6.84			56,782		982		6.93
			Total loans		151,676		2,571		6.74			155,085		2,577		6.66
Other earning assets					11,770		144		4.86			11,361		154		5.42
			Total earning assets		255,789		3,966		6.17			254,424		3,948		6.22
Cash and due from banks					9,955							10,110
Other assets					55,767							50,180
			Total assets	$	321,511						$	314,714
LIABILITIES AND STOCKHOLDERS’ EQUITY
	Interest-bearing deposits
		Savings and NOW accounts			49,156		199		1.61			49,341		183		1.49
		Money market accounts			43,495		239		2.18			40,035		224		2.25
		Other consumer time			36,029		347		3.82			36,956		365		3.96
		Foreign			6,491		30		1.84			7,195		33		1.88
		Other time			6,134		32		2.07			6,220		31		1.93
			Total interest-bearing deposits		141,305		847		2.38			139,747		836		2.40
	Federal funds purchased and securities sold under repurchase agreements				31,884		241		3.00			31,894		229		2.88
	Commercial paper				2,999		9		1.18			3,025		8		1.17
	Other short-term borrowings				9,505		60		2.49			10,039		63		2.51
	Long-term debt				38,477		289		3.00			39,107		297		3.04
			Total interest-bearing liabilities		224,170		1,446		2.56			223,812		1,433		2.57
	Noninterest-bearing deposits				38,772							38,449
	Other liabilities				27,466							22,877
	Stockholders’ equity				31,103							29,576
			Total liabilities and stockholders’ equity	$	321,511						$	314,714
Interest income and rate earned						$	3,966		6.17	%			$	3,948		6.22	%
Interest expense and equivalent rate paid							1,446		2.24					1,433		2.26
Net interest income and margin (d)						$	2,520		3.93	%			$	2,515		3.96	%

(a)  Certain amounts presented in periods prior to the third quarter of 2002 have been reclassified to conform to the presentation in the third quarter of 2002.

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

(c)  The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.

62

FIRST QUARTER 2002							FOURTH QUARTER 2001							THIRD QUARTER 2001
				Average							Average							Average
		Interest		Rates					Interest		Rates					Interest		Rates
Average		Income/		Earned/			Average		Income/		Earned/			Average		Income/		Earned/
Balances		Expense		Paid			Balances		Expense		Paid			Balances		Expense		Paid
$	4,341		22		2.07	%	$	3,333		21		2.50	%	$	1,740		17		3.86	%
	12,020		93		3.13			11,784		99		3.32			10,031		107		4.25
	14,703		165		4.53			14,552		175		4.81			14,572		199		5.43
	56,287		884		6.29			55,708		905		6.49			50,621		877		6.93
	59,927		1,049		7.10			62,220		1,202		7.67			55,490		1,142		8.17
	8,126		86		4.28			7,919		101		5.02			4,512		66		5.88
	17,163		238		5.61			17,139		263		6.10			10,923		184		6.66
	7,442		193		10.37			7,578		199		10.51			6,441		168		10.42
	6,831		62		3.71			7,374		81		4.34			6,267		83		5.26
	99,489		1,628		6.62			102,230		1,846		7.17			83,633		1,643		7.80
	21,444		354		6.60			24,032		414		6.90			19,816		353		7.12
	36,131		668		7.49			36,577		724		7.87			29,577		637		8.57
	57,575		1,022		7.16			60,609		1,138		7.49			49,393		990		7.99
	157,064		2,650		6.82			162,839		2,984		7.29			133,026		2,633		7.87
	11,073		140		5.13			11,668		179		6.11			9,682		155		6.35
	255,488		3,954		6.24			259,884		4,363		6.68			219,672		3,988		7.23
	10,553							10,313							8,737
	49,281							49,024							39,337
$	315,322						$	319,221						$	267,746
	48,931		175		1.45			47,527		222		1.85			41,897		259		2.46
	37,589		265		2.86			35,023		282		3.19			23,816		260		4.32
	38,166		399		4.24			40,931		484		4.70			35,469		474		5.30
	7,578		35		1.85			8,603		56		2.58			7,441		71		3.74
	8,119		41		2.09			10,325		72		2.73			11,662		119		4.07
	140,383		915		2.64			142,409		1,116		3.11			120,285		1,183		3.90
	31,940		211		2.68			33,028		298		3.59			26,982		332		4.87
	3,435		10		1.15			3,709		29		3.07			2,950		25		3.36
	10,550		65		2.51			9,617		45		1.86			9,870		60		2.45
	41,057		276		2.69			42,979		391		3.64			38,220		414		4.34
	227,365		1,477		2.63			231,742		1,879		3.22			198,307		2,014		4.04
	38,126							37,562							30,313
	20,928							21,377							18,796
	28,903							28,540							20,330
$	315,322						$	319,221						$	267,746
		$	3,954		6.24	%			$	4,363		6.68	%			$	3,988		7.23	%
			1,477		2.34					1,879		2.87					2,014		3.65
		$	2,477		3.90	%			$	2,484		3.81	%			$	1,974		3.58	%

(d)  The net interest margin includes (in basis points): 38, 39, 47, 27 and 18 in the third, second and first quarters of 2002, and in the fourth and third quarters of 2001, respectively, in net interest income from hedge-related derivative transactions.

63

WACHOVIA CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES (a)

				NINE MONTHS ENDED 2002							NINE MONTHS ENDED 2001
								Average							Average
						Interest		Rates					Interest		Rates
				Average		Income/		Earned/			Average		Income/		Earned/
(In millions)				Balances		Expense		Paid			Balances		Expense		Paid
ASSETS
Interest-bearing bank balances				$	3,276		49		2.00	%	$	2,031		71		4.70	%
Federal funds sold and securities purchased under resale agreements					11,104		260		3.14			8,674		301		4.64
Trading account assets (b)					15,676		545		4.64			13,955		607		5.80
Securities (b)					59,186		2,778		6.26			50,324		2,721		7.21
Loans (b) (c)
	Commercial
		Commercial, financial and agricultural			58,669		3,144		7.16			54,029		3,370		8.34
		Real estate — construction and other			8,016		251		4.19			3,651		180		6.63
		Real estate — mortgage			17,220		697		5.41			9,554		513		7.17
		Lease financing			7,276		575		10.54			6,201		486		10.44
		Foreign			6,923		181		3.49			5,682		258		6.08
			Total commercial		98,104		4,848		6.60			79,117		4,807		8.12
	Consumer
		Real estate — mortgage			20,164		966		6.39			18,295		1,002		7.30
		Installment loans and vehicle leasing			36,321		1,984		7.30			26,666		1,789		8.97
			Total consumer		56,485		2,950		6.97			44,961		2,791		8.29
			Total loans		154,589		7,798		6.74			124,078		7,598		8.18
Other earning assets					11,404		438		5.13			10,352		598		7.72
			Total earning assets		255,235		11,868		6.21			209,414		11,896		7.59
Cash and due from banks					10,204							8,269
Other assets					51,766							36,135
			Total assets	$	317,205						$	253,818
LIABILITIES AND STOCKHOLDERS’ EQUITY
	Interest-bearing deposits
		Savings and NOW accounts			49,143		557		1.52			40,109		790		2.63
		Money market accounts			40,395		728		2.41			19,565		662		4.52
		Other consumer time			37,043		1,111		4.01			34,389		1,457		5.67
		Foreign			7,084		98		1.86			6,885		238		4.62
		Other time			6,818		104		2.03			12,452		481		5.17
			Total interest-bearing deposits		140,483		2,598		2.47			113,400		3,628		4.28
	Federal funds purchased and securities sold under repurchase agreements				31,906		681		2.85			26,379		1,066		5.40
	Commercial paper				3,151		27		1.17			2,643		83		4.20
	Other short-term borrowings				10,026		188		2.50			9,754		215		2.95
	Long-term debt				39,538		862		2.91			37,041		1,454		5.24
			Total interest-bearing liabilities		225,104		4,356		2.59			189,217		6,446		4.55
	Noninterest-bearing deposits				38,451							28,515
	Other liabilities				23,781							18,669
	Stockholders’ equity				29,869							17,417
			Total liabilities and stockholders’ equity	$	317,205						$	253,818
Interest income and rate earned						$	11,868		6.21	%			$	11,896		7.59	%
Interest expense and equivalent rate paid							4,356		2.28					6,446		4.12
Net interest income and margin (d)						$	7,512		3.93	%			$	5,450		3.47	%

(a)  Certain amounts presented in the nine months ended 2001 have been reclassified to conform to the presentation in the nine months ended 2002.

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

(c)  The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.

(d)  The net interest margin includes (in basis points): 41 and 15 for the nine months ended September 30, 2002, and September 30, 2001, respectively, in net interest income from hedge-related derivative transactions.

64

WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (a)

			2002									2001
			Third			Second			First			Fourth			Third
(In millions, except per share data)			Quarter			Quarter			Quarter			Quarter			Quarter
ASSETS
Cash and due from banks			$	11,930			10,668			10,038			13,917			10,051
Interest-bearing bank balances				3,561			2,269			3,356			6,875			2,128
Federal funds sold and securities purchased under resale agreements (carrying amount of collateral held $2,811 at September 30, 2002, $800 repledged)				7,132			11,541			13,154			13,919			9,354
		Total cash and cash equivalents		22,623			24,478			26,548			34,711			21,533
Trading account assets				35,902			34,570			28,227			25,386			26,763
Securities				72,071			60,999			57,382			58,467			56,929
Loans, net of unearned income				157,542			158,800			162,294			163,801			169,680
	Allowance for loan losses			(2,847	)		(2,951	)		(2,986	)		(2,995	)		(3,039	)
		Loans, net		154,695			155,849			159,308			160,806			166,641
Premises and equipment				5,422			5,494			5,596			5,719			5,775
Due from customers on acceptances				1,080			1,105			888			745			796
Goodwill				10,810			10,728			10,728			10,616			10,496
Intangible assets				1,675			1,827			1,988			2,156			2,441
Other assets				29,602			29,629			29,188			31,846			34,523
		Total assets	$	333,880			324,679			319,853			330,452			325,897
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
	Noninterest-bearing deposits			44,186			39,558			39,323			43,464			36,382
	Interest-bearing deposits			143,599			141,105			140,710			143,989			144,167
		Total deposits		187,785			180,663			180,033			187,453			180,549
Short-term borrowings				41,146			46,109			46,559			44,385			44,303
Bank acceptances outstanding				1,093			1,110			892			762			798
Trading account liabilities				17,760			14,108			10,261			11,437			10,084
Other liabilities				14,233			14,379			13,387			16,227			18,424
Long-term debt				39,758			37,931			39,936			41,733			43,233
		Total liabilities		301,775			294,300			291,068			301,997			297,391
STOCKHOLDERS’ EQUITY
Dividend Equalization Preferred shares, no par value, 97 million shares issued and outstanding at September 30, 2002				2			5			11			17			—
Common stock, $3.33-1/3 par value; authorized 3 billion shares, outstanding 1.373 billion shares at September 30, 2002				4,577			4,570			4,559			4,539			4,537
Paid-in capital				18,233			18,106			17,989			17,911			17,835
Retained earnings				7,221			6,663			6,136			5,551			5,139
Accumulated other comprehensive income, net				2,072			1,035			90			437			995
		Total stockholders’ equity		32,105			30,379			28,785			28,455			28,506
		Total liabilities and stockholders’ equity	$	333,880			324,679			319,853			330,452			325,897

(a)  In the second quarter of 2002, certain amounts were changed to reflect the adoption of expensing stock options granted in 2002.

65

WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (a)

		2002									2001
		Third			Second			First			Fourth			Third
(In millions, except per share data)		Quarter			Quarter			Quarter			Quarter			Quarter
INTEREST INCOME
Interest and fees on loans		$	2,558			2,563			2,637			2,970			2,621
Interest and dividends on securities			935			906			856			876			852
Trading account interest			179			173			155			166			192
Other interest income			240			252			255			299			279
	Total interest income		3,912			3,894			3,903			4,311			3,944
INTEREST EXPENSE
Interest on deposits			847			836			915			1,116			1,183
Interest on short-term borrowings			310			300			286			372			417
Interest on long-term debt			289			297			276			391			414
	Total interest expense		1,446			1,433			1,477			1,879			2,014
Net interest income			2,466			2,461			2,426			2,432			1,930
Provision for loan losses			435			397			339			381			1,124
Net interest income after provision for loan losses			2,031			2,064			2,087			2,051			806
FEE AND OTHER INCOME
Service charges and fees			664			661			661			672			541
Commissions			458			481			464			448			356
Fiduciary and asset management fees			427			466			477			478			400
Advisory, underwriting and other investment banking fees			72			225			240			223			177
Principal investing			(29	)		(42	)		(90	)		(21	)		(585	)
Other income			298			319			275			260			143
	Total fee and other income		1,890			2,110			2,027			2,060			1,032
NONINTEREST EXPENSE
Salaries and employee benefits			1,588			1,665			1,663			1,663			1,374
Occupancy			195			194			195			210			176
Equipment			234			231			226			247			214
Advertising			20			25			19			21			15
Communications and supplies			136			132			134			142			117
Professional and consulting fees			111			96			88			113			79
Goodwill and other intangible amortization			152			161			168			251			117
Merger-related and restructuring charges			107			143			(8	)		88			85
Sundry expense			402			279			284			295			218
	Total noninterest expense		2,945			2,926			2,769			3,030			2,395
Income (loss) before income taxes (benefits)			976			1,248			1,345			1,081			(557	)
Income taxes (benefits)			60			393			432			345			(223	)
	Net income (loss)		916			855			913			736			(334	)
Dividends on preferred stock			3			6			6			6			—
	Net income (loss) available to common stockholders	$	913			849			907			730			(334	)
PER COMMON SHARE DATA
Basic earnings		$	0.67			0.62			0.67			0.54			(0.31	)
Diluted earnings			0.66			0.62			0.66			0.54			(0.31	)
Cash dividends		$	0.26			0.24			0.24			0.24			0.24
AVERAGE COMMON SHARES
Basic			1,362			1,360			1,355			1,352			1,094
Diluted			1,374			1,375			1,366			1,363			1,105

(a)  The second quarter of 2002 has been changed to include $19 million ($13 million after-tax, or 1 cent per share) in stock option expense related to stock options granted in 2002.

66

WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

		Nine Months Ended
		September 30,
(In millions, except per share data)		2002			2001
INTEREST INCOME
Interest and fees on loans		$	7,758			7,567
Interest and dividends on securities			2,697			2,658
Trading account interest			507			594
Other interest income			747			970
	Total interest income		11,709			11,789
INTEREST EXPENSE
Interest on deposits			2,598			3,628
Interest on short-term borrowings			896			1,364
Interest on long-term debt			862			1,454
	Total interest expense		4,356			6,446
Net interest income			7,353			5,343
Provision for loan losses			1,171			1,566
Net interest income after provision for loan losses			6,182			3,777
FEE AND OTHER INCOME
Service charges and fees			1,986			1,495
Commissions			1,403			1,120
Fiduciary and asset management fees			1,370			1,165
Advisory, underwriting and other investment banking fees			537			613
Principal investing			(161	)		(686	)
Other income			892			529
	Total fee and other income		6,027			4,236
NONINTEREST EXPENSE
Salaries and employee benefits			4,916			4,147
Occupancy			584			520
Equipment			691			632
Advertising			64			45
Communications and supplies			402			338
Professional and consulting fees			295			246
Goodwill and other intangible amortization			481			272
Merger-related and restructuring charges			242			18
Sundry expense			965			583
	Total noninterest expense		8,640			6,801
Income before income taxes			3,569			1,212
Income taxes			885			329
	Net income		2,684			883
Dividends on preferred stock			15			—
	Net income available to common stockholders	$	2,669			883
PER COMMON SHARE DATA
Basic earnings		$	1.96			0.86
Diluted earnings			1.95			0.85
Cash dividends		$	0.74			0.72
AVERAGE COMMON SHARES
Basic			1,359			1,010
Diluted			1,372			1,020

67

WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

			Nine Months Ended
			September 30,
(In millions)			2002			2001
OPERATING ACTIVITIES
Net income			$	2,684			883
Adjustments to reconcile net income to net cash provided (used) by operating activities
	Accretion and amortization of securities discounts and premiums, net			16			148
	Provision for loan losses			1,171			1,566
	Securitization gains			(242	)		(144	)
	Gain on sale of mortgage servicing rights			(47	)		(56	)
	Securities transactions			(123	)		51
	Depreciation, goodwill and other amortization			1,231			891
	Trading account assets, net			(10,516	)		(4,199	)
	Mortgage loans held for resale			(53	)		(577	)
	Loss on sales of premises and equipment			3			6
	Contribution to qualified pension plan			(703	)		(205	)
	Other assets, net			1,532			(833	)
	Trading account liabilities, net			6,323			2,609
	Other liabilities, net			(4,693	)		2,084
		Net cash provided (used) by operating activities		(3,417	)		2,224
INVESTING ACTIVITIES
Increase (decrease) in cash realized from
	Sales of securities			23,009			9,714
	Maturities of securities			10,377			5,111
	Purchases of securities			(38,669	)		(11,842	)
	Origination of loans, net			2,955			1,573
	Sales of premises and equipment			118			65
	Purchases of premises and equipment			(359	)		(309	)
	Goodwill and other intangible assets, net			(144	)		(86	)
	Purchase of bank-owned separate account life insurance			(147	)		(81	)
	Cash equivalents acquired, net of purchases of banking organizations			9			3,591
		Net cash provided (used) by investing activities		(2,851	)		7,736
FINANCING ACTIVITIES
Increase (decrease) in cash realized from
	Sales of deposits, net			332			(5,265	)
	Securities sold under repurchase agreements and other short-term borrowings, net			(3,239	)		(3,251	)
	Issuances of long-term debt			3,525			7,562
	Payments of long-term debt			(5,500	)		(9,799	)
	Sales of common stock			91			(67	)
	Purchases of common stock			—			(1,284	)
	Cash dividends paid			(1,029	)		(708	)
		Net cash used by financing activities		(5,820	)		(12,812	)
		Decrease in cash and cash equivalents		(12,088	)		(2,852	)
		Cash and cash equivalents, beginning of year		34,711			24,385
		Cash and cash equivalents, end of period	$	22,623			21,533
NONCASH ITEMS
Transfer to securities from loans			$	4,070			95
Transfer to securities from other assets				2,246			908
Transfer to other assets from trading account assets				—			201
Transfer to other assets from loans, net				(1,851	)		1,651
Issuance of common stock for purchase accounting merger			$	51			12,998

68