Wachovia Corp New (WBPS) 10-Q 2005 Q3 Quarterly report

Exhibit (19)

Third Quarter 2005

Management’s Discussion and Analysis

Quarterly Financial Supplement

Nine Months Ended September 30, 2005

WACHOVIA CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL SUPPLEMENT
NINE MONTHS ENDED SEPTEMBER 30, 2005
TABLE OF CONTENTS

	PAGE
Financial Highlights		1
Management’s Discussion and Analysis
Explanation of Our Use of Non-GAAP Financial Measures		28
Selected Statistical Data		29
Summaries of Income, Per Common Share and Balance Sheet Data		30
Merger-Related and Restructuring Expenses		31
Business Segments		32
Net Trading Revenue — Investment Banking		48
Selected Ratios		48
Trading Account Assets and Liabilities		48
Loans — On-Balance Sheet, and Managed and Servicing Portfolios		49
Loans Held for Sale		50
Allowance for Loan Losses and Nonperforming Assets		51
Reserve for Unfunded Lending Commitments		52
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		56
Net Interest Income Summaries — Nine Months Ended September 30, 2005 and 2004		57
Net Interest Income Summaries — Five Quarters Ended September 30, 2005		58
Consolidated Balance Sheets — Five Quarters Ended September 30, 2005		60
Consolidated Statements of Income — Five Quarters Ended September 30, 2005		61
Wachovia Corporation and Subsidiaries — Consolidated Financial Statements		62

FINANCIAL HIGHLIGHTS

	Three Months Ended								Nine Months Ended
	September 30,					Percent			September 30,					Percent
						Increase								Increase
(Dollars in millions, except per share data)	2005			2004		(Decrease)			2005			2004		(Decrease)
EARNINGS SUMMARY
Net interest income(GAAP)	$	3,403			2,965		15	%	$	10,174			8,664		17	%
Tax-equivalent adjustment		53			63		(16	)		167			190		(12	)
Net interest income(Tax-equivalent)		3,456			3,028		14			10,341			8,854		17
Fee and other income		3,242			2,601		25			9,214			7,975		16
Total revenue(Tax-equivalent)		6,698			5,629		19			19,555			16,829		16
Provision for credit losses		82			43		91			168			148		14
Other noninterest expense		3,820			3,445		11			11,107			10,186		9
Merger-related and restructuring expenses		83			127		(35	)		234			328		(29	)
Other intangible amortization		101			99		2			323			318		2
Total noninterest expense		4,004			3,671		9			11,664			10,832		8
Minority interest in income of consolidated subsidiaries		104			28		—			239			130		84
Income before income taxes(Tax-equivalent)		2,508			1,887		33			7,484			5,719		31
Tax-equivalent adjustment		53			63		(16	)		167			190		(12	)
Income taxes		790			561		41			2,381			1,763		35
Net income	$	1,665			1,263		32	%	$	4,936			3,766		31	%
Diluted earnings per common share	$	1.06			0.96		10	%	$	3.10			2.85		9	%
Return on average common stockholders’ equity		13.95	%		15.12		—			13.97	%		15.33		—
Return on average assets		1.29	%		1.18		—			1.31	%		1.22		—
ASSET QUALITY
Allowance for loan losses as % of loans, net		1.13	%		1.33		—			1.13	%		1.33		—
Allowance for loan losses as % of nonperforming assets		303			258		—			303			258		—
Allowance for credit losses as % of loans, net		1.20			1.41		—			1.20			1.41		—
Net charge-offs as % of average loans, net		0.10			0.15		—			0.09			0.15		—
Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale		0.37	%		0.50		—			0.37	%		0.50		—
CAPITAL ADEQUACY
Tier I capital ratio		7.42	%		8.34		—			7.42	%		8.34		—
Total capital ratio		10.79			11.22		—			10.79			11.22		—
Leverage ratio		5.96	%		6.21		—			5.96	%		6.21		—
OTHER FINANCIAL DATA
Net interest margin		3.20	%		3.36		—			3.25	%		3.42		—
Fee and other income as % of total revenue		48.40			46.21		—			47.12			47.39		—
Effective income tax rate		32.21	%		30.71		—			32.55	%		31.88		—
BALANCE SHEET DATA
Securities	$	117,195			102,157		15	%	$	117,195			102,157		15	%
Loans, net		239,733			174,504		37			239,733			174,504		37
Total assets		532,381			436,698		22			532,381			436,698		22
Total deposits		320,439			252,981		27			320,439			252,981		27
Long-term debt		45,846			41,444		11			45,846			41,444		11
Stockholders’ equity	$	46,757			33,897		38	%	$	46,757			33,897		38	%
OTHER DATA
Average diluted common shares(In millions)		1,575			1,316		20	%		1,590			1,321		20	%
Actual common shares(In millions)		1,553			1,308		19			1,553			1,308		19
Dividends paid per common share	$	0.51			0.40		28		$	1.43			1.20		19
Dividend payout ratio on common shares		48.11	%		41.67		15			46.13	%		42.11		10
Book value per common share	$	30.10			25.92		16		$	30.10			25.92		16
Common stock price		47.59			46.95		1			47.59			46.95		1
Market capitalization	$	73,930			61,395		20		$	73,930			61,395		20
Common stock price to book value		158	%		181		(13	)		158	%		181		(13	)
FTE employees		92,907			84,503		10			92,907			84,503		10
Total financial centers/brokerage offices		3,840			3,215		19			3,840			3,215		19
ATMs		5,119			4,395		16	%		5,119			4,395		16	%

1

Management’s Discussion and Analysis

This discussion contains forward-looking statements. Please refer to our Third Quarter 2005 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.

Executive Summary

Summary of Results of Operations	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions, except per share data)	2005		2004		2005		2004
Net interest income(GAAP)	$	3,403		2,965		10,174		8,664
Tax-equivalent adjustment		53		63		167		190
Net interest income(a)		3,456		3,028		10,341		8,854
Fee and other income		3,242		2,601		9,214		7,975
Total revenue(a)		6,698		5,629		19,555		16,829
Provision for credit losses		82		43		168		148
Other noninterest expense		3,820		3,445		11,107		10,186
Merger-related and restructuring expenses		83		127		234		328
Other intangible amortization		101		99		323		318
Total noninterest expense		4,004		3,671		11,664		10,832
Minority interest in income of consolidated subsidaries		104		28		239		130
Income taxes		790		561		2,381		1,763
Tax-equivalent adjustment		53		63		167		190
Net income		1,665		1,263		4,936		3,766
Diluted earnings per common share	$	1.06		0.96		3.10		2.85

^(a) Tax-equivalent.

Wachovia’s net income in the first nine months of 2005 was $4.9 billion, up 31 percent from the first nine months of 2004, and diluted earnings per common share were $3.10, up 9 percent. These amounts include after-tax net merger-related and restructuring expenses of 9 cents per share in the first nine months of 2005 and 11 cents per share in the first nine months of 2004. Results reflect the merger of Wachovia and SouthTrust Corporation, which closed on November 1, 2004. Under the purchase method of accounting, prior periods have not been restated.

In the first nine months of 2005 compared with the first nine months of 2004, revenue grew 16 percent to $19.6 billion on 23 percent growth in average earning assets. These results reflect:

• A 17 percent increase in net interest income related to balance sheet growth due to the SouthTrust acquisition as well as organic growth.

• 16 percent growth in fee and other income from, in addition to SouthTrust, increased debit card interchange fees, capital markets fees, trading revenues and gains on the sale of equity securities received in settlement of problem loans. Weaker market activity dampened commissions.

• Fee income represented 47 percent of our total revenue in the first nine months of 2005 and 2004.

The provision rose to $168 million and included $13 million related to loan sales and transfers. Credit quality remained very strong, with a 24 percent decline in total nonperforming assets, including loans held for sale, from December 31, 2004. The annualized net charge-off ratio was 0.09 percent, down from 0.15 percent in the first nine months of 2004. We continue to mitigate risk and volatility on our balance sheet by actively monitoring and reducing potential problem loans, including the sale of at-risk credits when prudent.

2

Average net loans in the first nine months of 2005 increased $60.9 billion from the first nine months of 2004 to $224.7 billion. This increase included not only the addition from SouthTrust, but also the effect of a net $9.4 billion of consumer real estate-secured loans transferred to the loan portfolio in the fourth quarter of 2004 from loans held for sale and $2.6 billion in higher net leasing balances due to a previously reported income tax settlement. In addition, commercial loans reflected strength in middle-market commercial and large corporate lending. Average core deposits increased $53.9 billion from the first nine months of 2004 to $275.8 billion, and average low-cost core deposits increased $44.8 billion to $226.9 billion, primarily due to SouthTrust.

Merger and other expense efficiencies held noninterest expense growth to 8 percent from the first nine months of 2004, which drove a 472 basis point improvement in the overhead efficiency ratio to 59.65 percent. Further information about our goals for improving efficiency is in theOutlook section.

Our diversified business model and strategic focus on expense control helped drive solid performance by our four major businesses amid industry challenges such as a flattening yield curve and a weak retail brokerage environment.

• The General Bank’s earnings rose 35 percent on 24 percent higher revenue from the first nine months of 2004 largely due to increased earning assets related to the SouthTrust acquisition and other loan growth. The General Bank’s overhead efficiency ratio was a record low 48.97 percent.

• Capital Management grew earnings 17 percent from the first nine months of 2004 despite a modest decline in revenues as efficiencies from the now-completed retail brokerage integration offset weak brokerage transaction activity.

• Wealth Management generated a 30 percent increase in earnings on record revenue, up 19 percent. These results reflected strong growth in loans and deposits, improved trust and investment management fees, and the May 2005 acquisition of an insurance brokerage firm.

• Our Corporate and Investment Bank generated modest earnings growth on 10 percent higher revenue with particular strength in advisory, underwriting and other investment banking fees, along with higher trading results. Net interest income declined due to higher funding costs associated with our commercial leasing portfolio, and a change in the mix of trading assets, which lowered the overall spread in the trading portfolio. Expenses rose due to higher variable compensation and strategic hiring in key positions.

In addition, as we manage interest rate risk, we believe a rising rate environment — assuming it is accompanied by a rebound in business activity in the wake of a more robust economy — will produce many benefits for our business model. Our investment and hedging strategy is designed to achieve our goal of stable and growing net interest income in a variety of rate environments, and we believe we are well positioned with our current neutral to slightly liability sensitive stance for anticipated rises in interest rates and a flatter yield curve indicated by market forward rate projections. Our balance sheet is strong and “well capitalized” under regulatory guidelines with a tier 1 capital ratio of 7.42 percent and a leverage ratio of 5.96 percent at September 30, 2005.

3

In August 2005, Wachovia’s board of directors increased the quarterly dividend paid to common stockholders to 51 cents per share from 46 cents per share. In the first nine months of 2005, we paid common stockholders total dividends of $2.2 billion, or $1.43 per common share, up 19 percent from the first nine months of 2004. This represented a dividend payout ratio on earnings in the first nine months of 2005 of 46.13 percent, or 43.07 percent excluding merger-related and restructuring expenses, other intangible amortization and a change in accounting principle, which is in line with our goal of paying out 40 percent to 50 percent of earnings on this basis.

In the third quarter of 2005 compared with the third quarter of 2004, net income including the SouthTrust impact rose 32 percent to $1.7 billion, and diluted earnings per common share rose 10 percent to $1.06. These amounts include after-tax net merger-related and restructuring expenses of 3 cents per share in the third quarter of 2005 and 4 cents per share in the third quarter of 2004.

Total revenue rose 19 percent to $6.7 billion in the third quarter of 2005 compared with the third quarter of 2004, with 14 percent growth in tax-equivalent net interest income and 25 percent growth in fee and other income. Net interest income growth reflected higher loans and deposits, largely related to SouthTrust. Growth in fee and other income, in addition to SouthTrust, was generally across-the-board, with improved service charges and banking fees, higher brokerage and insurance commissions, and solid investment banking fees, particularly in advisory and underwriting. Trading profits rebounded and principal investing results were strong, although down from the third quarter a year ago. Securities gains were modest. Merger and other expense efficiencies held expense growth to 9 percent.

Outlook

Our diversified business model and strong execution in our four major businesses on their efficiency initiatives and revenue growth strategies give us confidence Wachovia will be one of the leading growth companies in our industry. We continue to make excellent progress in meeting our corporate objectives of revenue growth and disciplined expense control, increased distribution of products and services, hallmark customer service and balance sheet strength.

Our overall financial outlook for 2005 remains relatively unchanged, although we have revised the underlying assumptions due to changing economic conditions during the course of the year. Our assumptions include growth in the real gross domestic product (GDP) of 3.50 percent; inflation (based on the Consumer Price Index) of 3.70 percent; a federal funds rate of 4.25 percent by December 2005; and a 10-year Treasury bond rate of 4.50 percent by December 2005. We also note that while our original outlook incorporated growth in the S&P 500 index of 6.00 percent, this index was unchanged in mid-October 2005.

This outlook compares growth rates from an illustrative combined Wachovia-SouthTrust, as if the two companies had been merged on January 1, 2004. This illustrative comparison includes Wachovia’s full year 2004 results plus SouthTrust’s results from January 1, 2004, to October 31, 2004, and includes assumed deposit base and other intangible amortization. The following outlook is for the full year 2005:

4

• Net interest income growth in the low single-digit percentage range on a tax-equivalent basis;

• A 15 basis point to 20 basis point decline (with slight improvement expected between the third and fourth quarters of 2005) in the net interest margin from 3.42 percent for full year 2004;

• Fee income growth in the high single-digit percentage range;

• Noninterest expense (excluding merger-related and restructuring expenses) flat to slightly down, reflecting an estimated $250 million of incremental expense savings related to the retail brokerage integration, $250 million related to SouthTrust and approximately $150 million in 2005 related to our efficiency initiative;

• Minority interest expense (excluding merger-related and restructuring expenses) in the range of 3.0 percent to 3.5 percent of pre-tax income (before minority interest expense);

• Loan growth in the low teens percentage range, including consumer loan growth in the low- to mid-teens and commercial loan growth in the high-single-digit range;

• Net charge-offs in the 10 basis point to 20 basis point range with provision expense also expected to be in this range;

• An effective tax rate of approximately 34.0 percent to 34.5 percent on a tax-equivalent basis;

• A leverage ratio above 6.00 percent and a tangible capital to tangible asset ratio of approximately 4.7 percent to 4.8 percent;

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

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

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

The 15-month integration of SouthTrust is proceeding on track and on budget. Deposit and branch conversions in overlapping states were completed in June 2005 and in the states in our extended footprint in October 2005. We project $255 million in annual after-tax expense reductions beginning in the first quarter of 2006 after integration is complete, and merger-related and restructuring expenses and exit cost purchase accounting adjustments of $431 million after tax. In addition, we have recorded preliminary fair market value purchase accounting adjustments of $341 million after tax, representing a net increase in goodwill. These are preliminary adjustments and are subject to further refinements as integration plans and valuations are finalized.

5

In addition, in the third quarter of 2005, we announced agreements to acquire or invest in opportunities that we believe will augment the diversity of our business model and deepen our customer relationships. The agreements include:

• Expansion of our auto dealer financial services business and the addition of 19 retail banking offices in Southern California through the purchase of Westcorp and WFS Financial Inc. of Irvine, California, in a $3.9 billion transaction. The terms of the merger agreement call for Westcorp shareholders to receive 1.2749 shares of Wachovia common stock in exchange for each share of Westcorp common stock, and for WFS Financial shareholders to receive 1.4661 shares of Wachovia common stock for each share of WFS Financial common stock. The transaction is expected to close in the first quarter of 2006, subject to regulatory and Westcorp’s and WFS Financial’s shareholder approval.

• The international correspondent banking business of UnionBanCal Corporation of San Francisco, California for $245 million in cash, subject to an upward adjustment not to exceed $45 million based upon business retention. The substantial majority of this transaction was consummated on October 6, 2005, while the operations of certain non-U.S. offices remain to be transferred to Wachovia pending receipt of certain required foreign regulatory approvals.

• The nationwide residential mortgage banker, AmNet Mortgage, Inc., of San Diego, California, for $10.30 in cash per AmNet share or approximately $83 million. The transaction is expected to close in the fourth quarter of 2005, subject to regulatory and AmNet shareholder approval.

• A minority ownership stake in Golden Capital Management, LLC, an investment management firm with $2.1 billion in assets headquartered in Charlotte, North Carolina. Golden Capital will serve as a sub-advisor to Evergreen Private Asset Management, the high net worth division of Evergreen Investments. The transaction, which is private, is expected to close in the fourth quarter of 2005.

In November 2005, we announced our intention to re-enter the credit card market as a direct issuer beginning in January 2006. This announcement coincided with our decision to terminate our existing joint marketing agreement with MBNA Corporation, as a result of the proposed Bank of America/MBNA merger, which is expected to close on January 1, 2006. Upon consummation of that merger, MBNA is required to pay us a $100 million termination fee, which will be recorded as income on the effective date of the merger. The proceeds of this fee will defray the costs of re-entering the credit card business.

We continue to evaluate our operations and organizational structures to ensure they are closely aligned with our goal of maximizing performance through increased efficiency and competitiveness in our four core businesses. We are striving to make Wachovia a more efficient company, but it is not our goal to have the lowest overhead efficiency ratio in our peer group, because of our business mix. We believe we will slow expense growth by $600 million to $1.0 billion by 2007. We believe this will result in position reductions in the range of 3,500 to 4,000, approximately 20 percent of which will result from normal attrition, although we also expect to add positions in higher growth businesses. To date, we have identified initial expense reduction opportunities in the range of $400 million to $500 million and work continues. We also expect to reinvest approximately 30 percent to 50 percent of the identified annual savings to increase revenues in our higher growth businesses.

6

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

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

Segment tables in theBusiness Segmentssection have additional information.

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

Critical Accounting Policies

It is important to understand our more significant accounting policies and the extent to which we use judgment and estimates in applying those policies when analyzing our financial position and results of operations. Our accounting and reporting policies are in accordance with U.S. generally accepted accounting principles (GAAP) and they conform to general practices within the applicable industries. We use a significant amount of judgment and estimates based on assumptions for which the actual results are uncertain when we make the estimation. We have identified five policies as being particularly sensitive in terms of judgments and the extent to which estimates are used: allowance for loan losses and the reserve for unfunded lending commitments (which is recorded in other liabilities); fair value of certain financial instruments; consolidation; goodwill impairment; and contingent liabilities. For more information on these critical accounting policies, please refer to our 2004 Annual Report on Form 10-K.

7

Corporate Results of Operations

Our results for the first nine months of 2005 reflect the November 1, 2004, merger of Wachovia and SouthTrust Corporation.

Average Balance Sheets and Interest Rates	Nine Months Ended					Nine Months Ended
	September 30, 2005					September 30, 2004
	Average		Interest			Average		Interest
(In millions)	Balances		Rates			Balances		Rates
Interest-bearing bank balances	$	2,516		3.05	%	$	3,467		1.27	%
Federal funds sold		24,467		3.05			25,013		1.17
Trading account assets		33,577		4.78			26,402		4.18
Securities		114,956		5.11			99,980		4.87
Commercial loans, net		130,530		5.50			93,125		4.52
Consumer loans, net		94,171		5.71			70,684		5.20
Total loans, net		224,701		5.59			163,809		4.81
Loans held for sale		14,500		5.56			15,168		4.20
Other earning assets		10,296		4.90			11,241		3.12
Risk management derivatives		—		0.24			—		0.44
Total earning assets		425,013		5.46			345,080		4.84
Interest-bearing deposits		237,550		1.85			187,519		1.06
Federal funds purchased		53,954		2.84			47,340		1.14
Commercial paper		13,191		2.91			12,099		1.16
Securities sold short		10,776		3.37			10,464		2.76
Other short-term borrowings		6,511		1.75			6,165		0.76
Long-term debt		47,764		4.35			38,359		3.99
Risk management derivatives		—		0.14			—		0.12
Total interest-bearing liabilities		369,746		2.54			301,946		1.62
Net interest income and margin	$	10,341		3.25	%	$	8,854		3.42	%

Net Interest Income and MarginTax-equivalent net interest income increased 17 percent in the first nine months of 2005 from the first nine months of 2004 due to balance sheet growth reflecting the SouthTrust merger as well as strong organic deposit growth. Balance sheet growth offset compression in the net interest margin, which declined 17 basis points to 3.25 percent primarily due to the impact of growth in our FDIC-insured sweep product and related investments, growth in structured product and mortgage warehouses, increased low-yielding trading assets, lower contributions from hedge-related derivatives, and the impact of a flattening yield curve, partially offset by wider deposit spreads. The average federal funds discount rate in the first nine months of 2005 was 181 basis points higher than the average for the first nine months of 2004, while average longer-term two-year rates increased 148 basis points and 10-year treasury note rates decreased 9 basis points.

In order to maintain our targeted interest rate risk profile, derivatives are used to manage the interest rate risk inherent in our assets and liabilities. In the event that these strategies provide less benefit to current income in the short-term, we would expect them to benefit future periods. In the first nine months of 2005, net interest rate risk management-related derivative income contributed $369 million to net interest income, representing a 12 basis point impact on our net interest margin, compared with $865 million, or 33 basis points, in the first nine months of 2004. Risk management-related derivatives are those that have been designated and accounted for as accounting hedges.

8

Fee and Other Income	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In millions)	2005		2004			2005		2004
Service charges	$	555		499			1,596		1,459
Other banking fees		385		313			1,091		883
Commissions		615		568			1,817		1,981
Fiduciary and asset management fees		732		668			2,174		2,072
Advisory, underwriting and other investment banking fees		294		237			784		640
Trading account profits (losses)		146		(60	)		262		51
Principal investing		166		201			266		254
Securities gains (losses)		29		(71	)		163		(33	)
Other income		320		246			1,061		668
Total fee and other income	$	3,242		2,601			9,214		7,975

Fee and Other IncomeSixteen percent fee and other income growth in the first nine months of 2005 compared with the first nine months of 2004 included the impact of SouthTrust and also reflected:

• Improved debit card interchange income.

• Lower commissions reflecting weak retail brokerage markets.

• Improved investment banking fees, particularly in advisory and underwriting.

• Strong trading revenues.

• Investment portfolio gains of $75 million and gains in our Corporate and Investment Bank of $88 million, principally related to structured products activity.

• $122 million in gains on the sale of equity securities received in settlement of loans and a $38 million gain on the sale of our investment in a United Kingdom asset-based lending subsidiary, which are included in other income.

Many of the same factors contributed to the 25 percent growth in the third quarter of 2005 from the third quarter of 2004. Other contributing factors beyond the impact of SouthTrust included:

• Growth in brokerage and insurance commissions, largely reflecting the impact of the Palmer & Cay acquisition.

• Increased advisory, underwriting and other investment banking fees largely from growth in merger and acquisition advisory services and structured products.

• Strong principal investing results, although down from the prior year’s third quarter.

• Modest securities gains compared with losses in the prior year.

9

Noninterest Expense	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2005		2004		2005		2004
Salaries and employee benefits	$	2,476		2,118		7,201		6,464
Occupancy		260		234		781		687
Equipment		276		268		810		780
Advertising		50		46		142		142
Communications and supplies		158		149		478		457
Professional and consulting fees		167		134		449		369
Sundry expense		433		496		1,246		1,287
Other noninterest expense		3,820		3,445		11,107		10,186
Merger-related and restructuring expenses		83		127		234		328
Other intangible amortization		101		99		323		318
Total noninterest expense	$	4,004		3,671		11,664		10,832

Noninterest ExpenseNoninterest expense increased 8 percent in the first nine months of 2005 from the first nine months of 2004 largely due to the SouthTrust merger, offset by merger and other expense efficiencies. In addition to the SouthTrust impact, increased salaries and employee benefits, higher revenue-based incentives and strategic hiring led to the increase. Noninterest expense increased 9 percent in the third quarter of 2005 from the third quarter of 2004 largely due to the same factors.

Merger-Related and Restructuring ExpensesMerger-related and restructuring expenses in the first nine months of 2005 of $234 million included $170 million related to the SouthTrust merger and $63 million related to the retail brokerage transaction, the integration of which is completed. In the first nine months of 2004, we recorded $328 million of these expenses relating to the retail brokerage and First Union-Wachovia transactions, offset by $3 million in reversals.

In the third quarter of 2005, we recorded $83 million in net merger-related and restructuring expenses, of which $82 million related to the SouthTrust merger, compared with a total of $127 million in the third quarter of 2004.

We currently expect total merger-related and restructuring expenses for the SouthTrust merger to be $253 million before tax, of which $211 million had been recorded by September 30, 2005, with the remaining to be incurred through the first quarter of 2006.

Business Segments

We provide a diversified range of banking and nonbanking financial services and products primarily through our four core business segments, the General Bank, Capital Management, Wealth Management, and the Corporate and Investment Bank. In this section, we discuss the performance and results of our business segments in the first nine months of 2005 compared with the first nine months of 2004. Business segment data excludes merger-related and restructuring expenses and intangible amortization.

Business segment earnings are the primary measure of segment profit or loss we use to assess segment performance and to allocate resources. Economic profit, risk-adjusted return on capital (RAROC) and efficiency ratios are additional metrics, all of which are based on and calculated directly from segment earnings, that assist management in evaluating segment results. Please refer to our 2004 Annual Report for additional information related to our business segments and performance metrics.

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We continuously update segment information for changes that occur in the management of our businesses. The impact of changes in the first nine months of 2005 to previously reported segment earnings for full year 2004 was:

• A $7 million decrease in the General Bank,

• A $5 million decrease in Capital Management,

• A $7 million increase in Wealth Management,

• A $42 million decrease in the Corporate and Investment Bank, and

• A $47 million increase in the Parent.

General Bank	Three Months Ended					Nine Months Ended
Performance Summary	September 30,					September 30,
(Dollars in millions)	2005			2004		2005		2004
Income statement data
Net interest income(Tax-equivalent)	$	2,434			1,985		7,203		5,728
Fee and other income		760			601		2,131		1,772
Intersegment revenue		56			43		148		121
Total revenue(Tax-equivalent)		3,250			2,629		9,482		7,621
Provision for credit losses		77			74		202		207
Noninterest expense		1,584			1,362		4,643		3,990
Income taxes(Tax-equivalent)		583			433		1,702		1,243
Segment earnings	$	1,006			760		2,935		2,181
Performance and other data
Economic profit	$	775			592		2,229		1,655
Risk adjusted return on capital (RAROC)		54.85	%		57.00		53.46		53.63
Economic capital, average	$	7,019			5,123		7,021		5,187
Cash overhead efficiency ratio(Tax-equivalent)		48.74	%		51.80		48.97		52.35
Lending commitments	$	105,598			76,592		105,598		76,592
Average loans, net		163,801			124,687		161,685		121,696
Average core deposits	$	208,718			170,188		205,460		165,798
FTE employees		41,609			34,519		41,609		34,519

General BankThe General Bank segment includes our Retail and Small Business and Commercial lines of business. Results reflect the SouthTrust acquisition. Key General Bank trends in the first nine months of 2005 compared with the first nine months of 2004 included:

• 35 percent earnings growth on 24 percent higher revenue driven by 26 percent growth in net interest income and a 20 percent increase in fee and other income, largely due to SouthTrust.

• Growth in net interest income was generated by higher loans and deposits due to the SouthTrust impact as well as organic growth. Middle-market lending led commercial loan growth while real estate-secured lending led consumer loan growth. The deposit mix continued to shift in the rising rate environment, with core deposit growth driven by consumer certificates of deposit and money market deposits.

• Increased fee and other income, in addition to higher volume largely related to SouthTrust, was driven by higher service charges, debit card interchange income and mortgage banking income and origination fees.

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

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In the third quarter of 2005 compared with the third quarter of 2004, the same trends drove General Bank results. In addition:

• Excluding the SouthTrust impact, higher earnings credits in a rising rate environment dampened commercial deposit charges. Commercial money market outflows slowed.

• The rate environment also slowed growth in prime equity lines and the lending mix began shifting from variable rate to fixed.

• Loan margins tightened.

Capital Management	Three Months Ended						Nine Months Ended
Performance Summary	September 30,						September 30,
(Dollars in millions)	2005			2004			2005			2004
Income statement data
Net interest income(Tax-equivalent)	$	171			155			486			410
Fee and other income		1,201			1,124			3,578			3,703
Intersegment revenue		(12	)		(13	)		(36	)		(37	)
Total revenue(Tax-equivalent)		1,360			1,266			4,028			4,076
Provision for credit losses		—			—			—			—
Noninterest expense		1,111			1,094			3,293			3,456
Income taxes(Tax-equivalent)		93			62			271			225
Segment earnings	$	156			110			464			395
Performance and other data
Economic profit	$	117			74			349			282
Risk adjusted return on capital (RAROC)		44.22	%		33.27			44.32			38.28
Economic capital, average	$	1,399			1,312			1,401			1,379
Cash overhead efficiency ratio(Tax-equivalent)		81.86	%		86.39			81.78			84.78
Lending commitments	$	184			107			184			107
Average loans, net		694			643			675			508
Average core deposits	$	30,700			29,547			31,194			24,558
FTE employees		18,340			19,699			18,340			19,699

Capital ManagementCapital Management includes Retail Brokerage Services, which includes retail brokerage and our annuity and reinsurance businesses, and Asset Management, which includes mutual funds, customized investment advisory services, and corporate and institutional trust services. Key Capital Management trends in the first nine months of 2005 compared with the first nine months of 2004 included:

• 17 percent earnings growth despite a slight decline in revenue as noninterest expense declined as a result of efficiencies from the now-completed brokerage integration, which offset weak retail brokerage commissions.

• A 19 percent increase in net interest income largely as a result of $6.6 billion in average core deposit growth primarily due to the movement of money market fund balances to the FDIC-insured sweep product.

• A 3 percent decline in fee and other income as higher retail brokerage recurring income, including managed account fees, was offset by lower retail brokerage commissions due to sluggish transaction activity and the impact of lower asset management fee income from the sale of two nonstrategic businesses in 2004.

• $3.2 billion in revenue from the retail brokerage businesses, down $43 million, as transactional revenues declined 13 percent to $1.5 billion, partially offset by 11 percent growth in recurring and other income to $1.7 billion.

• $832 million in revenue from the asset management businesses, down $8 million due to a $27 million decline from the 2004 sale of the two non-

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strategic businesses, partially offset by higher equity assets under management and a modest benefit from the SouthTrust merger.

• A 5 percent decline in noninterest expense largely due to ongoing efficiencies gained from the now-completed retail brokerage integration. The overhead efficiency ratio improved 300 basis points to 81.78 percent.

Trends in the third quarter 2005 compared with the third quarter of 2004 included:

• A 7 percent increase in revenue generated by solid growth in recurring income and improved retail brokerage activity. Brokerage managed account assets, which produce recurring income, reached a record $99.7 billion at September 30, 2005.

• 2 percent expense growth on higher brokerage commissions, partially offset by efficiencies gained from the now-completed brokerage integration.

Mutual Funds	2005															2004
	Third Quarter					Second Quarter					First Quarter					Fourth Quarter					Third Quarter					3Q05			3Q05
			Fund					Fund					Fund					Fund					Fund			vs			vs
(In billions)	Amount		Mix			Amount		Mix			Amount		Mix			Amount		Mix			Amount		Mix			2Q05			3Q04
Assets under management
Equity	$	31		30	%	$	30		29	%	$	29		29	%	$	29		27	%	$	26		25	%		3	%		19
Fixed income		25		25			25		25			26		26			27		26			27		25			—			(7	)
Money market		46		45			47		46			45		45			50		47			54		50			(2	)		(15	)
Total mutual fund assets	$	102		100	%	$	102		100	%	$	100		100	%	$	106		100	%	$	107		100	%		1	%		(4	)

Total Assets Under Management	2005															2004										3Q05			3Q05
	Third Quarter					Second Quarter					First Quarter					Fourth Quarter					Third Quarter					vs			vs
(In billions)	Amount		Mix			Amount		Mix			Amount		Mix			Amount		Mix			Amount		Mix			2Q05			3Q04
Assets under management
Equity	$	83		32	%	$	80		31	%	$	79		32	%	$	81		32	%	$	73		29	%		4	%		14
Fixed income		114		45			111		44			114		45			112		44			111		45			3			3
Money market		59		23			63		25			59		23			63		24			65		26			(6	)		(9	)
Total assets under management	$	256		100	%	$	254		100	%	$	252		100	%	$	256		100	%	$	249		100	%		1			3
Securities lending		50		—			48		—			45		—			41		—			36		—			3			37
Total assets under management and securities lending	$	306		—		$	302		—		$	297		—		$	297		—		$	285		—			1	%		7

Total assets under management grew slightly from year-end 2004 to $256.5 billion.

• Total net outflows were approximately $2 billion in the first nine months of 2005, offset by net asset appreciation of approximately $2 billion since year-end 2004 from increased market valuations.

• Equity mutual fund assets reached a record $31.2 billion at September 30, 2005, led by positive equity mutual funds sales and improving equity markets.

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Wealth Management	Three Months Ended						Nine Months Ended
Performance Summary	September 30,						September 30,
(Dollars in millions)	2005			2004			2005		2004
Income statement data
Net interest income(Tax-equivalent)	$	147			129			430		359
Fee and other income		191			143			520		441
Intersegment revenue		1			2			4		4
Total revenue(Tax-equivalent)		339			274			954		804
Provision for credit losses		6			(1	)		5		(1	)
Noninterest expense		235			191			645		571
Income taxes(Tax-equivalent)		35			31			111		85
Segment earnings	$	63			53			193		149
Performance and other data
Economic profit	$	48			36			144		98
Risk adjusted return on capital (RAROC)		47.41	%		42.66			49.20		39.98
Economic capital, average	$	528			447			504		449
Cash overhead efficiency ratio(Tax-equivalent)		68.99	%		69.93			67.54		71.06
Lending commitments	$	5,574			4,390			5,574		4,390
Average loans, net		14,180			11,204			13,546		10,671
Average core deposits	$	13,224			12,171			13,227		11,697
FTE employees		4,660			3,671			4,660		3,671

Wealth ManagementWealth Management provides a comprehensive suite of private banking, trust and investment management, financial planning and insurance brokerage services for wealthy individuals, their families and businesses. Results include the impact of the May 2005 acquisition of Palmer & Cay, Inc., an insurance brokerage firm, as well as SouthTrust. Key Wealth Management trends in the first nine months of 2005 compared with the first nine months of 2004 included:

• 30 percent earnings growth driven by a 19 percent increase in revenue, which outpaced 13 percent expense growth.

• 20 percent growth in net interest income was driven by higher volume in both consumer and commercial lending and by deposit growth.

• 18 percent higher fee and other income was due to the impact of Palmer & Cay as well as improved trust and investment management fees on higher assets under management in improved markets.

• Higher provision expense of $5 million. In addition, noninterest expense growth largely related to Palmer & Cay and higher incentives on increased revenue production.

• Assets under management grew slightly from year-end 2004 to $65.6 billion.

These trends also drove results in the third quarter of 2005 compared with the prior year’s third quarter.

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Corporate and Investment Bank	Three Months Ended						Nine Months Ended
Performance Summary	September 30,						September 30,
(Dollars in millions)	2005			2004			2005			2004
Income statement data
Net interest income(Tax-equivalent)	$	549			587			1,661			1,772
Fee and other income		1,011			786			2,779			2,241
Intersegment revenue		(45	)		(33	)		(118	)		(90	)
Total revenue(Tax-equivalent)		1,515			1,340			4,322			3,923
Provision for credit losses		(3	)		(15	)		(14	)		(45	)
Noninterest expense		809			682			2,253			1,920
Income taxes(Tax-equivalent)		263			247			774			753
Segment earnings	$	446			426			1,309			1,295
Performance and other data
Economic profit	$	263			269			782			820
Risk adjusted return on capital (RAROC)		29.63	%		34.19			30.36			35.10
Economic capital, average	$	5,603			4,603			5,402			4,543
Cash overhead efficiency ratio(Tax-equivalent)		53.39	%		50.86			52.12			48.93
Lending commitments	$	93,938			75,732			93,938			75,732
Average loans, net		38,783			32,854			37,832			30,579
Average core deposits	$	24,797			18,597			22,749			17,506
FTE employees		4,799			4,548			4,799			4,548

Corporate and Investment BankOur Corporate and Investment Bank segment includes corporate lending, investment banking, and treasury and international trade finance. Key Corporate and Investment Bank trends in the first nine months of 2005 compared with the first nine months of 2004 included:

• Modest earnings growth on 10 percent higher revenue as higher fee and other income overcame a decline in net interest income.

• Fee and other income rose 24 percent largely due to record results in advisory and underwriting fees, with particular strength in structured products and merger and acquisition advisory activity. Strong trading profits and principal investing gains, driven by both direct and fund investments, also contributed to the increase. In addition, nine month 2005 results included a first quarter gain of $122 million on the sale of equity securities received in settlement of loans and a second quarter $41 million gain on a structured products consumer loan securitization.

• Net interest income declined 6 percent primarily due to higher funding costs associated with the second quarter 2004 resolution of tax matters related to our commercial leasing portfolio and a change in the mix of trading assets, which lowered the overall spread in the trading portfolio.

• A 17 percent increase in noninterest expense due to higher variable compensation and increased strategic hiring in key positions resulting in a higher overhead efficiency ratio.

• Average loan growth reflecting higher corporate loans and the inclusion of SouthTrust. Recoveries continued to be a net benefit to the provision.

• A 30 percent increase in average core deposits primarily from higher commercial mortgage servicing and international correspondent banking.

The trends described above also largely drove results in the third quarter of 2005 compared with the third quarter of 2004. In addition, the 6 percent decline in net interest income quarter over quarter also reflected a decline in the commercial leasing portfolio.

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Parent	Three Months Ended						Nine Months Ended
Performance Summary	September 30,						September 30,
(Dollars in millions)	2005			2004			2005			2004
Income statement data
Net interest income(Tax-equivalent)	$	155			172			561			585
Fee and other income		79			(53	)		206			(182	)
Intersegment revenue		—			1			2			2
Total revenue(Tax-equivalent)		234			120			769			405
Provision for credit losses		2			(15	)		(25	)		(13	)
Noninterest expense		182			215			596			567
Minority interest		105			65			264			214
Income taxes(Tax-equivalent)		(100	)		(114	)		(231	)		(259	)
Segment earnings (loss)	$	45			(31	)		165			(104	)
Performance and other data
Economic profit	$	34			(50	)		126			(126	)
Risk adjusted return on capital (RAROC)		16.06	%		2.55			17.89			3.62
Economic capital, average	$	2,529			2,253			2,462			2,256
Cash overhead efficiency ratio(Tax-equivalent)		35.05	%		96.32			35.51			61.86
Lending commitments	$	433			319			433			319
Average loans, net		11,502			(836	)		10,963			355
Average core deposits	$	3,309			2,486			3,132			2,305
FTE employees		23,499			22,066			23,499			22,066

ParentParent includes all asset and liability management functions, including managing our investment portfolio for liquidity and interest rate risk. Parent also includes goodwill and other intangible assets, and related funding costs, certain revenues and expenses that are not allocated to the business segments; and the results of our HomEq Servicing business, which is responsible for home equity loan servicing, including that generated and retained by our mortgage company, as well as servicing for third party portfolios. Key trends in the Parent segment in the first nine months of 2005 compared with the first nine months of 2004 included:

• A revenue increase due to higher fee and other income, offset by a small decline in net interest income.

• Higher fee and other income including a $211 million increase in securities gains and a $177 million increase in other income.

• Other income included a gain of $38 million associated with the sale of an asset-based lending subsidiary in the United Kingdom and a $45 million increase in income from asset securitizations, which included $60 million of losses related to auto loan securitization activity. Other income in 2004 included a loss of $68 million associated with a sale and leaseback of corporate real estate.

• A $13.2 billion increase in average securities to $106.6 billion reflecting deposit growth and higher balance sheet positions as discussed in theBalance Sheet Analysis section.

• A $29 million increase in noninterest expense.

In the third quarter of 2005 compared with the third quarter of 2004:

• Total revenue increased $114 million primarily due to higher fee and other income reflecting higher securities gains of $99 million and an increase in trading profits of $34 million.

• Other income rose $31 million, primarily reflecting higher income from corporate investments of $22 million.

• Noninterest expense declined 15 percent primarily due to lower legal costs.

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This segment reflects the impact of Prudential Financial’s 38 percent minority interest in Wachovia Securities Financial Holdings, LLC. Total minority interest expense, which also includes other subsidiaries, was $264 million in the first nine months of 2005 compared with $214 million in the first nine months of 2004.

Balance Sheet Analysis

SecuritiesThe increase in securities available for sale from December 31, 2004, reflects higher business unit positions, deposit growth and greater use of cash securities in lieu of derivatives to maintain our relatively neutral interest rate risk position. TheInterest Rate Risk Managementsection further explains our interest rate risk management practices. The average rate earned on securities available for sale was 5.11 percent in the first nine months of 2005 and 4.87 percent in the first nine months of 2004. Unrealized net securities gains declined due to the effect of higher rates.

Securities Available For Sale
	September 30,		December 31,
(In billions)	2005		2004
Market value	$	117.2		110.6
Net unrealized gain	$	0.1		1.8
Memoranda(Market value)
Residual interests	$	0.8		0.9
Retained bonds
Investment grade(a)		4.4		5.2
Other		0.1		—
Total	$	4.5		5.2

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

Loans — On-Balance Sheet
	2005						2004
	Third		Second		First		Fourth		Third
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
Commercial
Commercial, financial and agricultural	$	83,241		80,528		78,669		75,095		59,271
Real estate — construction and other		13,653		13,216		12,713		12,673		6,985
Real estate — mortgage		19,864		19,724		20,707		20,742		14,771
Lease financing		25,022		24,836		25,013		25,000		24,042
Foreign		8,888		7,549		7,504		7,716		7,402
Total commercial		150,668		145,853		144,606		141,226		112,471
Consumer
Real estate secured		80,128		76,213		74,631		74,161		54,965
Student loans		11,458		10,828		10,795		10,468		10,207
Installment loans		6,745		6,783		6,808		7,684		6,410
Total consumer		98,331		93,824		92,234		92,313		71,582
Total loans		248,999		239,677		236,840		233,539		184,053
Unearned income		9,266		9,390		9,574		9,699		9,549
Loans, net(On-balance sheet)	$	239,733		230,287		227,266		223,840		174,504

Loans — Managed Portfolio(Including on-balance sheet)
	2005						2004
	Third		Second		First		Fourth		Third
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
Commercial	$	155,970		148,929		147,125		145,072		116,287
Real estate secured		106,261		102,761		98,161		97,021		86,043
Student loans		11,799		11,226		11,283		11,059		10,921
Installment loans		10,458		10,417		9,959		10,359		9,094
Total managed portfolio	$	284,488		273,333		266,528		263,511		222,345

LoansThe increase in net loans from year-end 2004 reflects growth in commercial loans, while consumer loan growth was partially offset by transfers to loans held for sale. The majority of the 7 percent growth in commercial loans reflected strength in middle-market commercial and large corporate lending, partially offset by lower commercial real estate mortgages. The 7 percent growth in consumer loans from year-end 2004 was partially offset by transfers to loans held for sale, including $1.2 billion of auto loans to loans held for sale in connection with securitization activity, and, as interest rates rose, some movement into fixed rate products particularly in the home equity market.

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Our loan portfolio is broadly diversified by industry, concentration and geography:

• Commercial loans represented 61 percent and consumer loans 39 percent of the loan portfolio at September 30, 2005.

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

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

• Of our $80.1 billion consumer real estate-secured loan portfolio,

• 79 percent is secured by a first lien,

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

• 89 percent has a loan-to-value ratio of 90 percent or less, and

• 39 percent is priced on a variable rate basis.

Our managed loan portfolio grew 8 percent from year-end 2004, reflecting the growth discussed above and real estate-secured securitizations. The managed loan portfolio includes the on-balance sheet loan portfolio, loans held for sale, loans securitized for which the retained interests are classified in securities, and the off-balance sheet portfolio of securitized loans sold where we service the loans.

Asset Quality	2005									2004
	Third			Second			First			Fourth			Third
(In millions)	Quarter			Quarter			Quarter			Quarter			Quarter
Nonperforming assets
Nonaccrual loans	$	784			819			910			955			798
Foreclosed properties		112			138			132			145			101
Total nonperforming assets	$	896			957			1,042			1,100			899
as % of loans, net and foreclosed properties		0.37	%		0.42			0.46			0.49			0.51
Nonperforming assets in loans held for sale	$	59			111			159			157			57
Total nonperforming assets in loans and in loans held for sale	$	955			1,068			1,201			1,257			956
as % of loans, net, foreclosed properties and loans held for sale		0.37	%		0.44			0.50			0.53			0.50
Allowance for credit losses(a)
Allowance for loan losses, beginning of period	$	2,718			2,732			2,757			2,324			2,331
Balance of acquired entities at purchase date		—			—			—			510			—
Net charge-offs		(59	)		(51	)		(46	)		(115	)		(65	)
Allowance relating to loans transferred or sold		(26	)		(11	)		(13	)		(51	)		3
Provision for credit losses related to loans transferred or sold(b)		12			—			1			(6	)		(8	)
Provision for credit losses		74			48			33			95			63
Allowance for loan losses, end of period		2,719			2,718			2,732			2,757			2,324
Reserve for unfunded lending commitments, beginning of period		158			156			154			134			146
Provision for credit losses		(4	)		2			2			20			(12	)
Reserve for unfunded lending commitments, end of period		154			158			156			154			134
Allowance for credit losses	$	2,873			2,876			2,888			2,911			2,458
Allowance for loan losses
as % of loans, net		1.13	%		1.18			1.20			1.23			1.33
as % of nonaccrual and restructured loans (c)		347			332			300			289			291
as % of nonperforming assets(c)		303			284			262			251			258
Allowance for credit losses
as % of loans, net		1.20	%		1.25			1.27			1.30			1.41
Net charge-offs	$	59			51			46			115			65
Commercial, as % of average commercial loans		0.05	%		0.03			—			0.20			0.05
Consumer, as % of average consumer loans		0.18	%		0.18			0.19			0.28			0.30
Total, as % of average loans, net		0.10	%		0.09			0.08			0.23			0.15
Past due loans, 90 days and over, and nonaccrual loans(c)
Commercial, as a % of loans, net		0.43	%		0.45			0.50			0.56			0.57
Consumer, as a % of loans, net		0.71	%		0.77			0.80			0.80			0.89

(a)	The allowance for credit losses is the sum of the allowance for loan losses and the reserve for unfunded lending commitments.
(b)	The provision related to loans transferred or sold includes recovery of lower of cost or market losses.
(c)	These ratios do not include nonperforming assets included in loans held for sale.

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Nonperforming AssetsNonperforming assets decreased 24 percent from year-end 2004. Nonaccrual loans declined $171 million, or 18 percent, from year-end 2004 and reflected sales of $222 million. Nonperforming assets declined to a record low 0.37 percent of loans, foreclosed properties and loans held for sale. New inflows to commercial nonaccrual loans were $634 million from year-end 2004. Impaired commercial loans were $565 million at September 30, 2005, down from $712 million at December 31, 2004.

Past Due LoansAccruing loans 90 days or more past due, excluding loans that are classified as loans held for sale, were $525 million at September 30, 2005, compared with $522 million at December 31, 2004. Of total past due loans, $46 million were commercial loans or commercial real estate loans and $479 million were consumer loans.

Net Charge-offsAnnualized net charge-offs as a percentage of average net loans of 0.09 percent in the first nine months of 2005 were down 6 basis points from the first nine months of 2004. Commercial net charge-offs were $25 million compared with $20 million and consumer net charge-offs were $131 million compared with $165 million in the first nine months of 2005 compared with the first nine months of 2004. The low level of net charge-offs reflects moderating trends in nonperforming assets at the current beneficial point in the credit cycle, our strategic decision to actively manage down potential problem loans and a higher level of recoveries during the period. In addition, as older vintages of consumer loans mature or pay down, a higher quality consumer loan mix remains.

Provision for Credit LossesOur strategy is to mitigate risk and volatility on our balance sheet by actively monitoring and reducing potential problem loans, including the sale of at-risk credits when prudent. The provision for credit losses increased 14 percent from the first nine months of 2004 to $168 million in the first nine months of 2005 partially due to amounts recorded to reflect the impact of recent hurricanes. The provision also included $13 million related to loan sales and transfers as well as the addition of SouthTrust in 2004. In the third quarter of 2005 compared with the third quarter of 2004, the provision for credit losses increased 91 percent due primarily to the impact of loan sales and SouthTrust.

Allowance for Loan Losses and Reserve for Unfunded Lending CommitmentsThe allowance for loan losses decreased by $38 million from year-end 2004 to $2.7 billion at September 30, 2005, reflecting a $50 million reduction related to transfers to loans held for sale and loans sold out of the loan portfolio and reduced risk in our loan portfolio. The unallocated portion of the allowance increased from the year-end 2004 to reflect the impact of recent hurricanes, the full effect of which is under review. The reserve for unfunded lending commitments was $154 million at September 30, 2005, and at year-end 2004. The reserve for unfunded lending commitments relates to commercial loans and is included in other liabilities.

Loans Held for SaleLoans held for sale include loans originated for sale or securitization as part of our core business strategy and the activities related to our ongoing portfolio risk management strategies to reduce exposure to areas of perceived higher risk. Our core business activity represents loans we originate with the intent to sell to third parties and primarily includes mortgages, commercial and consumer real estate-secured loans, and beginning in the second quarter of 2005, auto loans. At September 30, 2005, and December 31, 2004, core business activity represented substantially all of loans held for sale.

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In the first nine months of 2005, we sold or securitized $21.4 billion in loans out of the loans held for sale portfolio, including $7.1 billion of commercial loans and $14.3 billion of consumer loans, primarily residential mortgages. We also transferred $1.2 billion of auto loans to loans held for sale in connection with securitization activity. Of the loans sold, $56 million were nonperforming.

In the first nine months of 2004, we sold or securitized $13.9 billion of loans out of the loans held for sale portfolio. Of these loans, $24 million were nonperforming.

Consumer real estate-secured loans in loans held for sale amounted to $10.8 billion at September 30, 2005, and $8.4 billion at year-end 2004. Mortgage loans in loans held for sale were $1.9 billion at September 30, 2005, and at year-end 2004. Auto loans in loans held for sale were $1.3 billion at September 30, 2005. Commercial loans in loans held for sale were $4.0 billion at September 30, 2005, compared with $1.7 billion at year-end 2004.

GoodwillIn connection with acquisitions, we recorded purchase accounting adjustments to reflect the respective fair values of the assets and liabilities of SouthTrust as of November 1, 2004, and of Palmer & Cay as of May 6, 2005, as well as certain exit costs related to these mergers, which have the effect of increasing goodwill. These purchase accounting adjustments are preliminary and are subject to refinement for up to one year following consummation. In addition, we expect to record exit cost purchase accounting adjustments through October 2005 for SouthTrust and through April 2006 for Palmer & Cay.

For the SouthTrust merger, to date we have recorded preliminary fair value purchase accounting adjustments and corresponding increases in goodwill of $416 million ($341 million after tax) and exit cost purchase accounting adjustments of $199 million ($167 million after tax), primarily related to personnel, employee termination benefits, and occupancy and equipment costs, offset by the effect of regulatory mandated branch sales. In addition, we recorded deposit base and customer relationship intangibles of $735 million ($452 million after tax). Based on a purchase price of $14.0 billion and SouthTrust tangible stockholders’ equity of $3.9 billion, this resulted in goodwill of $10.1 billion at September 30, 2005.

In the first nine months of 2005, we favorably resolved certain exit cost liabilities related to the Wachovia Securities retail brokerage transaction and recorded a $61 million ($47 million after tax) reduction in goodwill to reflect the exit cost purchase accounting impact. Goodwill relating to this transaction was $533 million at September 30, 2005.

Liquidity and Capital Adequacy

Core DepositsCore deposits increased 5 percent from December 31, 2004, to $287.7 billion at September 30, 2005. Compared with the first nine months of 2004, average core deposits increased $53.9 billion to $275.8 billion and average low-cost core deposits increased $44.8 billion to $226.9 billion, including the SouthTrust impact.

Purchased FundsAverage purchased funds, which include wholesale borrowings with maturities of 12 months or less, were $97.4 billion in the first nine months of 2005 and $80.8 billion in the first nine months of 2004. The increase was primarily related to the SouthTrust merger. Purchased funds were $110.9 billion at September 30, 2005, and $83.9 billion at December 31, 2004, reflecting commercial paper increases and higher borrowings.

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Long-term DebtLong-term debt was $45.8 billion at September 30, 2005, and $46.8 billion at December 31, 2004. In the fourth quarter of 2005, scheduled maturities of long-term debt amount to $3.3 billion. We anticipate either extending the maturities of these obligations or replacing the maturing obligations.

Under our current shelf registration statement filed with the Securities and Exchange Commission, we have $19.6 billion of senior or subordinated debt securities, common stock or preferred stock available for issuance. In addition, we have available for issuance up to $7.9 billion under a medium-term note program covering senior or subordinated debt securities. Also, Wachovia Bank, National Association, has available a global note program for the issuance of up to $41.1 billion of senior or subordinated notes. In the first nine months of 2005, we issued $2.4 billion of subordinated bank notes under the global note program.

The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors.

Stockholders’ EquityThe slight decrease in stockholders’ equity from year-end 2004 to $46.8 billion at September 30, 2005, included repurchases of 51 million common shares at a cost of $2.7 billion in connection with our share repurchase programs and a lower level of net unrealized securities gains. The higher level of share repurchases in 2005 compared with 2004 reflect opportunistic deployment of excess capital partially related to the late 2004 SouthTrust acquisition as well as to higher earnings. In August 2005, our board of directors authorized a new 100 million share buyback program in addition to a 50 million share buyback program already in place. At September 30, 2005, we were authorized to buy back a remaining 124 million shares of common stock.

Dividend and Share Activity
	Nine Months Ended
	September 30,
(In millions, except per share data)	2005		2004
Dividends	$	2,245		1,571
Dividends per common share	$	1.43		1.20
Common shares repurchased		51		22
Average diluted common shares outstanding		1,590		1,321

In 2004 and 2005, we entered into transactions involving the simultaneous sale of put options and purchase of call options on 10 million shares of our common stock with expiration dates to September 2005. We entered into these equity collars to manage potential dilution associated with our employee stock options. These transactions were recorded as assets or liabilities with changes in fair value recorded in earnings. In the first nine months of 2005, we recorded a loss of $15 million related to market value changes of these collars. All of these transactions were exercised or have expired.

Subsidiary DividendsWachovia Bank, National Association, is the largest source of subsidiary dividends paid to the parent company. Capital requirements established by regulators limit dividends that this subsidiary and certain other of our subsidiaries can pay. Under these and other limitations, which include an internal requirement to maintain all deposit-taking banks at the well capitalized level, at September 30, 2005, our subsidiaries had $5.2 billion available for dividends that could be paid without prior regulatory approval. Our subsidiaries paid $3.3 billion in dividends to the parent company in the first nine months of 2005.

Regulatory CapitalOur capital ratios were above regulatory minimums in the first nine months of 2005 and we continued to be classified as “well capitalized.” The tier 1 capital ratio decreased

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59 basis points from December 31, 2004, to 7.42 percent, driven primarily by balance sheet growth. Our total capital ratio was 10.79 percent and our leverage ratio was 5.96 percent at September 30, 2005, and 11.11 percent and 6.38 percent, respectively, at December 31, 2004.

Off-Balance Sheet Transactions

In the normal course of business, we engage in a variety of financial transactions that under GAAP either are not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying elements of market, credit and liquidity risk. For more information on off-balance sheet guarantees and retained interests, please refer to our 2004 Annual Report on Form 10-K.

Summary of Off-Balance Sheet Exposures
	September 30, 2005				December 31, 2004
	Carrying				Carrying
(In millions)	Amount		Exposure		Amount		Exposure
Guarantees
Securities and other lending indemnifications	$	—		63,834		—		48,879
Standby letters of credit		106		33,757		101		30,815
Liquidity agreements		2		7,099		1		7,568
Loans sold with recourse		43		4,901		39		5,238
Residual value guarantees		12		682		9		629
Total guarantees	$	163		110,273		150		93,129

Retained InterestsRetained interests from securitizations with off-balance sheet entities recorded as either available for sale securities, trading account assets or loans amounted to $8.1 billion at September 30, 2005, and $6.5 billion at December 31, 2004. In the first nine months of 2005, we retained $99 million in the form of residual interests on $4.6 billion of consumer loans, principally consumer real estate-secured loans that were securitized and sold during the period.

Risk Governance and Administration

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

We use Value-at-Risk (VAR) methodology to assess market volatility over the most recent 252 trading days to estimate within a given level of confidence the maximum trading loss over a period of time that we would expect to incur from an adverse movement in market rates and prices over the period. We calculate 1-day VAR at the 97.5 percent and 99 percent confidence levels, and 10-day VAR at the 99 percent confidence level. The VAR model is supplemented by stress testing on a daily basis. The analysis captures all financial instruments that are considered trading positions. Our 1-day VAR limit in the first nine months of 2005 was $30 million. The total 1-day VAR was $20 million at September 30, 2005, and $21 million at December 31, 2004, and primarily related to interest rate risk and equity risk. The high, low and average VARs in the first nine months of 2005 were $28 million, $15 million and $20 million, respectively.

Interest Rate Risk ManagementOne of the fundamental roles in banking is the management of interest rate risk, or the risk that changes in interest rates may diminish the income that we earn on loans, securities and other earning assets. The following discussion

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explains how we oversee the interest rate risk management process and the actions we take to protect earnings from interest rate risk. Please refer to our 2004 Annual Report for a more detailed discussion of Wachovia’s interest rate risk management practices.

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

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

The “market forward rate” is constructed using currently implied market forward rate estimates for all points on the yield curve over the next 36 months. Our standard approach evaluates expected earnings in a 400 basis point range, or 200 basis points both above and below the “market forward rate” scenario. Our various scenarios together measure earnings volatility to an August 2006 federal funds rate ranging from 2.02 percent to 6.02 percent.

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

The impact of a nonparallel shift in rates depends on the types of assets in which funds are invested and the shape of the curve implicit in the “market forward rate” scenario. In the first half of 2004, the threat of rising rates, but uncertain timing, kept the curve very steep. Before the Federal Reserve’s Federal Open Market Committee’s tightening campaign began, our investment and hedging strategies were designed to manage both repricing risk and curve flattening that typically accompanies a rapid rise in short-term rates. Much of the anticipated flattening has occurred throughout 2004 and 2005. At September 30, 2005, the

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spread between the 10-year treasury note rate and the federal funds rate was 40 basis points, which is below the long-term average of 124 basis points. While we still believe further flattening is possible, and we will continue to measure the impact of a nonparallel shift in rates, we feel the risk of earnings volatility due to further flattening has somewhat subsided.

Considering the balance of risks for 2005, we will focus primarily on managing the value created through our expanded deposit base as we defend the net interest margin against the pressures of rising short-term rates and, relative to 2004, a significantly flatter curve. We expect to rely on our large base of low-cost core deposits to fund incremental investments in loans and securities. The characteristics of the loans we add will prompt different strategies. Fixed rate loans, for example, diminish the need to buy discretionary investments, so if more fixed rate loans were added to our loan portfolio, we would likely allow existing discretionary investments to mature or be liquidated. If more variable rate loans were added to our loan portfolio, we would likely allow fixed rate securities to mature or be liquidated, and then add new derivatives that, in effect, would convert the incremental variable rate loans to fixed rate loans.

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

Our model’s forward rate expectations imply an additional 25 basis points of tightening for the federal funds target rate by year-end, followed by a period of stable short-term rates for all of 2006. If these expectations prove to be correct, the spread between the 10-year treasury note yield and the federal funds rate would compress from 40 basis points at September 30, 2005, to 27 basis points by year-end 2005. The current market expectations therefore do not reflect a curve shape consistent with a scenario where short-term rates rise an additional 200 basis points. Therefore, our high rate sensitivity to the “market forward rate” scenario is measured using three different yield curve shapes. These curves are constructed to represent the likely range of yield curve shapes that may prevail in an environment where short-term rates rise 200 basis points above current market expectations. The reported sensitivity is a composite of these three scenarios.

Policy Period	Actual			Implied
Sensitivity Measurement	Fed Funds			Fed Funds		Percent
	Rate at			Rate at		Earnings
	September 1, 2005			August 31, 2006		Sensitivity
Market Forward Rate Scenarios(a)		3.57	%		4.02		—
High Rate Composite					6.02		(0.40	)
Low Rate					2.02		0.10

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

In September 2005, our earnings simulation model indicated earnings would be negatively affected by 0.4 percent in a “high rate composite” scenario relative to the “market forward rate” over the policy period. Additionally, we measure a scenario where short-term rates gradually decline 200 basis points over a 12-month period while longer-term 10-year and 30-year treasury notes decline by less than 200 basis points relative to the “market forward rate” scenario. The model indicates earnings would be positively affected by 0.1 percent in this scenario.

While our interest rate sensitivity modeling assumes management takes no action, we regularly assess the viability of strategies to reduce unacceptable risks to earnings and we implement such strategies when we believe those actions are prudent.

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Accounting and Regulatory Matters

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

Share-Based PaymentsIn December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised) (SFAS 123R),Share-Based Payments, which is a revision of SFAS No. 123,Accounting for Stock-Based Compensation. SFAS 123R requires that the compensation cost relating to share-based payment transactions be recognized in income. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS 123R is effective for share-based awards granted on or after January 1, 2006, based on recent guidance from the SEC, which delayed the original effective date of July 1, 2005. Early adoption is permitted. We adopted the fair value method of accounting for stock options in 2002. Accordingly, the implementation of SFAS 123R was not expected to have a material impact on our consolidated financial position or results of operations. However, interpretations of SFAS 123R are indicating that the period to recognize expense for options granted to retiree-eligible employees should be different than for other employees, which is not current practice. We are assessing the impact of these interpretations of SFAS 123R on our consolidated financial position and results of operations.

Leveraged Lease AccountingAs previously disclosed, the FASB has been discussing several matters relating to leveraged lease accounting. Currently, SFAS No. 13,Accounting for Leases, (SFAS 13) as amended and interpreted, states that if a change in an important lease assumption changes the total estimated net income under the lease, then a recalculation of the net investment in the leveraged lease must occur. On July 14, 2005, the FASB issued a proposed FASB Staff Position (FSP) that would amend SFAS 13 to provide that changes affecting the timing of cash flows but not the total net income under a leveraged lease will also trigger a recalculation of the lease. Under the proposed FSP, recalculations affecting existing leveraged leases would result in a one-time noncash charge to be recorded as a cumulative effect of a change in accounting principle on December 31, 2005. The proposed FSP provides that amounts would be recognized as income over the remaining terms of the affected leases, which in the aggregate would approximate the amount of the charge initially taken. The proposed FSP was subject to a 60-day comment period, which will be followed by final deliberations by the FASB and, therefore, the provisions and effective date of the proposed FSP are subject to change. We cannot predict with certainty what the final FSP will provide.

We have two broad classes of leveraged lease transactions that would be affected if the final FSP is the same as the proposed FSP: Lease-In, Lease-Out transactions (LILOs) and a second group of transactions that the Internal Revenue Service (IRS) broadly refers to as Sale-In, Lease-Out transactions (SILOs). SILOs principally include service contract and qualified technological equipment leases. As previously disclosed, in 2004 Wachovia and the IRS settled all issues relating to the IRS’s challenge of the tax position on LILOs entered into by First Union Corporation and legacy Wachovia Corporation. The resolution of these LILO issues led to a change in the timing of cash flows under the lease transactions. Accordingly, if the FSP is finalized as proposed and based on our interpretation of the proposed FSP, we currently estimate that we would be required to recognize a one-time after-tax noncash charge to the results of operations for LILOs of between $500 million and $800 million on the effective date. Under the proposed FSP, this amount would be recorded as a cumulative effect of a change in accounting principle, which would be presented on the consolidated statement of income after “income before cumulative effect of a change in accounting principle,” and would be recognized as income over the

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remaining terms of the affected LILOs. Retrospective restatement of prior periods is not permitted under the proposed FSP. Assuming the final FSP is the same as the proposed FSP, we currently estimate that the amounts to be recognized as income over the remaining term of the affected LILOs would not have a material impact to our earnings per share in future periods. In addition, we also believe the recognition of the one-time noncash charge for LILOs would not have an impact on our financial outlook relating to revenue and expense items or capital ratios for 2005 as described in theOutlooksection.

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

Income TaxesThe FASB has issued a proposed FASB Interpretation,Uncertain Tax Positions,to clarify the criteria for recognition of tax benefits in accordance with SFAS No. 109,Accounting for Income Taxes. Under the proposed Interpretation, a company would recognize in its financial statements its best estimate of the benefit associated with a tax position only if it is considered “probable”, as that term is defined in SFAS No. 5,Accounting for Contingencies, of being sustained on audit based solely on the technical merits of the tax position. The proposed effective date for the Interpretation is December 31, 2005, although the FASB has indicated a final Interpretation will not be issued until the first quarter of 2006, so the effective date is not currently expected to be December 31, 2005. Implementation of the final Interpretation will occur through a cumulative effect of a change in accounting principle to be recorded upon the initial adoption. Under the proposed Interpretation, only tax positions that meet the “probable” threshold at the effective date would continue to be recognized. We are currently analyzing the proposed Interpretation and have not determined its potential impact on our consolidated financial position or results of operations, including, as noted above, for SILO transactions. The proposed Interpretation was subject to a 60-day comment period and is being followed by final deliberations by the FASB and, therefore, is subject to change. We cannot predict with certainty what the final Interpretation will provide.

Financial InstrumentsThe FASB has issued three separate exposure drafts that address accounting for the transfer and holding of financial instruments. These proposals would amend SFAS No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, and one would also amend SFAS No. 133,Accounting for Derivative Instruments. The proposals would (i) revise or clarify the criteria for derecognition of financial assets after a transfer; (ii) change the recognition method at the date of transfer for certain retained positions, including servicing assets, to fair value from an allocated carrying amount; (iii) provide an option to elect recognition of servicing assets at fair value, with changes in fair value recorded in income; (iv) provide an option to elect recognition of hybrid financial instruments at fair value as one financial instrument, with changes in fair value recorded in income (currently, hybrid financial instruments are required to be separated into two instruments, a derivative and a host, and generally only the derivative instrument is recorded at fair value); and (v) require that bene-

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ficial interests in securitized assets be evaluated for derivatives, either freestanding or embedded, under SFAS 133 (currently, this is not required). These proposals have effective dates for transfers after July 1, 2006, and additional transition provisions that depend on the types of financial transfers involved. The proposed amendments were subject to a 60-day comment period and will be followed by final deliberations by the FASB and, therefore, are subject to change. We cannot predict with certainty what the final amendments will provide. We are currently assessing the impact of these proposed amendments on our consolidated financial position and results of operations. In addition, we transfer commercial mortgage loans to trusts that issue various classes of securities backed by the loans (CMBS) to investors. Recently, regulators and standard setters have had discussions with industry participants and accounting firms regarding certain features of CMBS structures and their servicing. The regulators and standard setters are considering the need for clarifying guidance and such guidance may result in changes in how these transactions are structured and/or accounted for, although we cannot predict with certainty whether any such guidance will be issued and what the transition provisions for implementing such guidance will be.

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

Regulatory MattersVarious legislative and regulatory proposals concerning the financial services industry are pending in Congress, the legislatures in states in which we conduct operations and before various regulatory agencies that supervise our operations. Given the uncertainty of the legislative and regulatory process, we cannot assess the impact of any such legislation or regulations on our consolidated financial position or results of operations. For a more detailed description of the laws and regulations governing our business operations, please see our 2004 Annual Report on Form 10-K.

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

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

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

     We believe these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance, our business and performance trends, and facilitates comparisons with the performance of others in the financial services industry. Specifically, we believe the exclusion of merger-related and restructuring expenses permits evaluation and a comparison of results for ongoing business operations, and it is on this basis that our management internally assesses our performance. These non-operating items also are excluded from our segment measures used internally to evaluate segment performance in accordance with GAAP because management does not consider them particularly relevant or useful in evaluating the operating performance of our business segments. For additional information regarding segment performance, see the “ Business Segments” sections. This quarterly financial supplement contains information regarding estimates of our future expenses excluding merger-related and restructuring expenses. The amount and timing of those future merger-related and restructuring expenses, however, are not estimable until such expenses actually occur, and therefore, reconciliation information relating to those future expenses and GAAP expenses has not been provided.

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

     This quarterly financial supplement also includes net interest income on a tax-equivalent basis. We believe the presentation of net interest income on a tax-equivalent basis ensures comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice.

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

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In millions, except per share data)	2005			2004		2005		2004
Net interest income(GAAP)	$	3,403			2,965		10,174		8,664
Tax-equivalent adjustment		53			63		167		190
Net interest income(Tax-equivalent)	$	3,456			3,028		10,341		8,854
DIVIDEND PAYOUT RATIOS ON COMMON SHARES
Diluted earnings per common share(GAAP)	$	1.06			0.96		3.10		2.85
Other intangible amortization		0.04			0.05		0.13		0.16
Merger-related and restructuring expenses		0.03			0.04		0.09		0.11
Earnings per share (a)	$	1.13			1.05		3.32		3.12
Dividends paid per common share	$	0.51			0.40		1.43		1.20
Dividend payout ratios(GAAP)(b)		48.11	%		41.67		46.13		42.11
Dividend payout ratios (a) (b)		45.13	%		38.10		43.07		38.46

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

28

Table 2
SELECTED STATISTICAL DATA

	2005							2004
	Third			Second		First		Fourth		Third
(Dollars in millions, except per share data)	Quarter			Quarter		Quarter		Quarter		Quarter
PROFITABILITY
Return on average common stockholders’ equity		13.95	%		14.04		13.92		13.50		15.12
Net interest margin (a)		3.20			3.23		3.31		3.37		3.36
Fee and other income as % of total revenue		48.40			46.60		46.30		45.50		46.21
Effective income tax rate		32.21	%		32.02		33.42		31.20		30.71
ASSET QUALITY
Allowance for loan losses as % of loans, net		1.13	%		1.18		1.20		1.23		1.33
Allowance for loan losses as % of nonperforming assets (b)		303			284		262		251		258
Allowance for credit losses as % of loans, net		1.20			1.25		1.27		1.30		1.41
Net charge-offs as % of average loans, net		0.10			0.09		0.08		0.23		0.15
Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale		0.37	%		0.44		0.50		0.53		0.50
CAPITAL ADEQUACY
Tier 1 capital ratio		7.42	%		7.85		7.91		8.01		8.34
Total capital ratio		10.79			11.25		11.40		11.11		11.22
Leverage		5.96	%		6.10		5.99		6.38		6.21
OTHER DATA
FTE employees		92,907			93,385		93,669		96,030		84,503
Total financial centers/brokerage offices		3,840			3,825		3,970		3,971		3,215
ATMs		5,119			5,089		5,234		5,321		4,395
Actual common shares (In millions)		1,553			1,577		1,576		1,588		1,308
Common stock price	$	47.59			49.60		50.91		52.60		46.95
Market capitalization	$	73,930			78,236		80,256		83,537		61,395

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

29

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

	2005								2004
	Third			Second		First			Fourth		Third
(In millions, except per share data)	Quarter			Quarter		Quarter			Quarter		Quarter
SUMMARIES OF INCOME
Interest income	$	6,060			5,702		5,453			4,969		4,301
Tax-equivalent adjustment		53			53		61			60		63
Interest income (a)		6,113			5,755		5,514			5,029		4,364
Interest expense		2,657			2,344		2,040			1,672		1,336
Net interest income (a)		3,456			3,411		3,474			3,357		3,028
Provision for credit losses		82			50		36			109		43
Net interest income after provision for credit losses (a)		3,374			3,361		3,438			3,248		2,985
Securities gains (losses)		29			136		(2	)		23		(71	)
Fee and other income		3,213			2,841		2,997			2,781		2,672
Merger-related and restructuring expenses		83			90		61			116		127
Other noninterest expense		3,921			3,698		3,811			3,718		3,544
Minority interest in income of consolidated subsidiaries		104			71		64			54		28
Income before income taxes		2,508			2,479		2,497			2,164		1,887
Income taxes		790			776		815			656		561
Tax-equivalent adjustment		53			53		61			60		63
Net income	$	1,665			1,650		1,621			1,448		1,263
PER COMMON SHARE DATA
Basic earnings	$	1.07			1.05		1.03			0.97		0.97
Diluted earnings		1.06			1.04		1.01			0.95		0.96
Cash dividends	$	0.51			0.46		0.46			0.46		0.40
Average common shares — Basic		1,549			1,564		1,571			1,487		1,296
Average common shares — Diluted		1,575			1,591		1,603			1,518		1,316
Average common stockholders’ equity
Quarter-to-date	$	47,328			47,114		47,231			42,644		33,246
Year-to-date		47,225			47,172		47,231			35,295		32,828
Book value per common share		30.10			30.37		29.48			29.79		25.92
Common stock price
High		51.34			53.07		56.01			54.52		47.50
Low		47.23			49.52		49.91			46.84		43.56
Period-end	$	47.59			49.60		50.91			52.60		46.95
To earnings ratio (b)		11.72	X		12.53		13.16			13.84		12.76
To book value		158	%		163		173			177		181
BALANCE SHEET DATA
Assets	$	532,381			511,840		506,833			493,324		436,698
Long-term debt	$	45,846			49,006		47,932			46,759		41,444

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

30

Table 4
MERGER—RELATED AND RESTRUCTURING EXPENSES

	Nine
	Months
	Ended
	Sept. 30,
(In millions)	2005
MERGER—RELATED AND RESTRUCTURING EXPENSES — WACHOVIA/SOUTHTRUST
Merger—related expenses
Personnel costs	$	18
Occupancy and equipment		20
Advertising		14
System conversion costs		61
Other		25
Total merger—related expenses		138
Restructuring expenses
Occupancy and equipment		29
Other		3
Total restructuring expenses		32
Total Wachovia/SouthTrust merger—related and restructuring expenses		170
MERGER—RELATED AND RESTRUCTURING EXPENSES — WACHOVIA SECURITIES RETAIL BROKERAGE
Merger—related expenses
Personnel costs		4
Occupancy and equipment		(1	)
System conversion costs		48
Other		11
Total merger—related expenses		62
Restructuring expenses
Occupancy and equipment		1
Total restructuring expenses		1
Total Wachovia Securities retail brokerage merger—related and restructuring expenses		63
Other merger—related and restructuring expenses		1
Total merger—related and restructuring expenses	$	234

31

Table 5
BUSINESS SEGMENTS (a)

	2005							2004
	Third			Second		First		Fourth		Third
(Dollars in millions)	Quarter			Quarter		Quarter		Quarter		Quarter
GENERAL BANK COMBINED (b)
Net interest income (c)	$	2,434			2,409		2,360		2,284		1,985
Fee and other income		760			687		684		660		601
Intersegment revenue		56			49		43		47		43
Total revenue (c)		3,250			3,145		3,087		2,991		2,629
Provision for credit losses		77			68		57		107		74
Noninterest expense		1,584			1,514		1,545		1,525		1,362
Income taxes		573			564		535		483		423
Tax-equivalent adjustment		10			10		10		10		10
Segment earnings	$	1,006			989		940		866		760
Economic profit	$	775			755		699		668		592
Risk adjusted return on capital		54.85	%		54.37		51.13		52.20		57.00
Economic capital, average	$	7,019			6,981		7,062		6,448		5,123
Cash overhead efficiency ratio (c)		48.74	%		48.16		50.04		50.98		51.80
Lending commitments	$	105,598			102,189		96,559		93,608		76,592
Average loans, net		163,801			161,774		159,433		146,978		124,687
Average core deposits	$	208,718			205,814		201,773		191,621		170,188
FTE employees		41,609			41,466		42,263		43,404		34,519
COMMERCIAL
Net interest income (c)	$	754			749		738		722		593
Fee and other income		103			101		112		96		102
Intersegment revenue		41			33		29		33		28
Total revenue (c)		898			883		879		851		723
Provision for credit losses		23			10		4		40		18
Noninterest expense		311			288		312		306		285
Income taxes		197			205		196		173		143
Tax-equivalent adjustment		10			10		10		10		10
Segment earnings	$	357			370		357		322		267
Economic profit	$	218			226		209		208		179
Risk adjusted return on capital		34.43	%		35.90		34.10		36.14		41.63
Economic capital, average	$	3,691			3,645		3,674		3,290		2,319
Cash overhead efficiency ratio (c)		34.64	%		32.61		35.44		35.94		39.41
Average loans, net	$	78,565			77,687		75,873		67,499		52,660
Average core deposits	$	42,422			42,357		42,676		42,831		39,339
RETAIL AND SMALL BUSINESS
Net interest income (c)	$	1,680			1,660		1,622		1,562		1,392
Fee and other income		657			586		572		564		499
Intersegment revenue		15			16		14		14		15
Total revenue (c)		2,352			2,262		2,208		2,140		1,906
Provision for credit losses		54			58		53		67		56
Noninterest expense		1,273			1,226		1,233		1,219		1,077
Income taxes		376			359		339		310		280
Tax-equivalent adjustment		—			—		—		—		—
Segment earnings	$	649			619		583		544		493
Economic profit	$	557			529		490		460		413
Risk adjusted return on capital		77.49	%		74.55		69.59		68.94		69.70
Economic capital, average	$	3,328			3,336		3,388		3,158		2,804
Cash overhead efficiency ratio (c)		54.13	%		54.24		55.86		56.96		56.50
Average loans, net	$	85,236			84,087		83,560		79,479		72,027
Average core deposits	$	166,296			163,457		159,097		148,790		130,849

(a)	Certain amounts presented in this Table 5 in periods prior to the third quarter of 2005 have been reclassified to conform to the presentation in the third quarter of 2005.
(b)	General Bank Combined represents the consolidation of the General Bank’s Commercial, and Retail and Small Business lines of business.
(c)	Tax-equivalent.

(Continued)

32

Table 5
BUSINESS SEGMENTS

	2005									2004
	Third			Second			First			Fourth			Third
(Dollars in millions)	Quarter			Quarter			Quarter			Quarter			Quarter
CAPITAL MANAGEMENT COMBINED (a)
Net interest income (b)	$	171			157			158			160			155
Fee and other income		1,201			1,188			1,189			1,211			1,124
Intersegment revenue		(12	)		(12	)		(12	)		(10	)		(13	)
Total revenue (b)		1,360			1,333			1,335			1,361			1,266
Provision for credit losses		—			—			—			—			—
Noninterest expense		1,111			1,089			1,093			1,143			1,094
Income taxes		92			89			89			78			62
Tax-equivalent adjustment		1			—			—			1			—
Segment earnings	$	156			155			153			139			110
Economic profit	$	117			117			115			99			74
Risk adjusted return on capital		44.22	%		44.82			43.93			38.75			33.27
Economic capital, average	$	1,399			1,393			1,411			1,421			1,312
Cash overhead efficiency ratio (b)		81.86	%		81.57			81.91			84.03			86.39
Lending commitments	$	184			176			148			119			107
Average loans, net		694			688			641			672			643
Average core deposits	$	30,700			30,846			32,052			31,927			29,547
FTE employees		18,340			18,507			18,935			19,822			19,699
Assets under management	$	256,474			253,984			252,223			256,321			249,238
ASSET MANAGEMENT
Net interest income (b)	$	14			12			11			12			11
Fee and other income		264			266			267			269			254
Intersegment revenue		(1	)		—			(1	)		—			(1	)
Total revenue (b)		277			278			277			281			264
Provision for credit losses		—			—			—			—			—
Noninterest expense		228			219			218			232			222
Income taxes		18			21			22			17			16
Tax-equivalent adjustment		—			—			—			—			—
Segment earnings	$	31			38			37			32			26
Economic profit	$	24			31			31			25			20
Risk adjusted return on capital		49.77	%		62.84			62.01			52.41			46.17
Economic capital, average	$	244			240			244			241			228
Cash overhead efficiency ratio (b)		82.55	%		78.62			78.68			82.34			84.19
Average loans, net	$	340			354			338			370			346
Average core deposits	$	2,393			1,806			1,625			1,680			1,563

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

(Continued)

33

Table 5
BUSINESS SEGMENTS

	2005									2004
	Third			Second			First			Fourth			Third
(Dollars in millions)	Quarter			Quarter			Quarter			Quarter			Quarter
RETAIL BROKERAGE SERVICES
Net interest income (b)	$	157			144			147			147			144
Fee and other income		939			925			926			945			873
Intersegment revenue		(10	)		(12	)		(11	)		(9	)		(12	)
Total revenue (b)		1,086			1,057			1,062			1,083			1,005
Provision for credit losses		—			—			—			—			—
Noninterest expense		887			875			881			920			880
Income taxes		74			66			67			59			44
Tax-equivalent adjustment		1			—			—			1			—
Segment earnings	$	124			116			114			103			81
Economic profit	$	92			85			82			70			51
Risk adjusted return on capital		42.55	%		40.59			39.55			34.58			29.34
Economic capital, average	$	1,156			1,154			1,169			1,183			1,086
Cash overhead efficiency ratio (b)		81.92	%		82.58			83.03			85.08			87.50
Average loans, net	$	354			334			303			302			297
Average core deposits	$	28,307			29,040			30,427			30,247			27,984
OTHER
Net interest income (b)	$	—			1			—			1			—
Fee and other income		(2	)		(3	)		(4	)		(3	)		(3	)
Intersegment revenue		(1	)		—			—			(1	)		—
Total revenue (b)		(3	)		(2	)		(4	)		(3	)		(3	)
Provision for credit losses		—			—			—			—			—
Noninterest expense		(4	)		(5	)		(6	)		(9	)		(8	)
Income taxes		—			2			—			2			2
Tax-equivalent adjustment		—			—			—			—			—
Segment earnings	$	1			1			2			4			3
Economic profit	$	1			1			2			4			3
Risk adjusted return on capital		—	%		—			—			—			—
Economic capital, average	$	(1)			(1	)		(2	)		(3	)		(2	)
Cash overhead efficiency ratio (b)		—	%		—			—			—			—
Average loans, net	$	—			—			—			—			—
Average core deposits	$	—			—			—			—			—

(Continued)

34

Table 5
BUSINESS SEGMENTS

	2005								2004
	Third			Second		First			Fourth		Third
(Dollars in millions)	Quarter			Quarter		Quarter			Quarter		Quarter
WEALTH MANAGEMENT
Net interest income (a)	$	147			143		140			137		129
Fee and other income		191			183		146			149		143
Intersegment revenue		1			1		2			1		2
Total revenue (a)		339			327		288			287		274
Provision for credit losses		6			—		(1	)		—		(1	)
Noninterest expense		235			220		190			200		191
Income taxes		35			40		36			31		31
Tax-equivalent adjustment		—			—		—			—		—
Segment earnings	$	63			67		63			56		53
Economic profit	$	48			50		46			38		36
Risk adjusted return on capital		47.41	%		50.21		50.14			42.37		42.66
Economic capital, average	$	528			512		472			484		447
Cash overhead efficiency ratio (a)		68.99	%		67.34		66.07			69.42		69.93
Lending commitments	$	5,574			5,154		4,862			4,711		4,390
Average loans, net		14,180			13,595		12,849			12,052		11,204
Average core deposits	$	13,224			13,198		13,259			12,858		12,171
FTE employees		4,660			4,693		3,878			3,911		3,671

(a) Tax-equivalent.

(Continued)

35

Table 5
BUSINESS SEGMENTS

	2005									2004
	Third			Second			First			Fourth			Third
(Dollars in millions)	Quarter			Quarter			Quarter			Quarter			Quarter
CORPORATE AND INVESTMENT BANK COMBINED (a)
Net interest income (b)	$	549			522			590			620			587
Fee and other income		1,011			789			979			684			786
Intersegment revenue		(45	)		(39	)		(34	)		(38	)		(33	)
Total revenue (b)		1,515			1,272			1,535			1,266			1,340
Provision for credit losses		(3	)		(8	)		(3	)		4			(15	)
Noninterest expense		809			711			733			659			682
Income taxes		242			185			271			192			217
Tax-equivalent adjustment		21			27			28			30			30
Segment earnings	$	446			357			506			381			426
Economic profit	$	263			176			343			226			269
Risk adjusted return on capital		29.63	%		23.88			38.21			29.72			34.19
Economic capital, average	$	5,603			5,486			5,112			4,806			4,603
Cash overhead efficiency ratio (b)		53.39	%		55.86			47.77			52.08			50.86
Lending commitments	$	93,938			88,944			81,118			81,461			75,732
Average loans, net		38,783			37,872			36,819			35,227			32,854
Average core deposits	$	24,797			22,495			20,912			21,009			18,597
FTE employees		4,799			4,845			4,623			4,723			4,548
CORPORATE LENDING
Net interest income (b)	$	218			219			235			232			217
Fee and other income		124			98			244			122			99
Intersegment revenue		6			5			6			7			6
Total revenue (b)		348			322			485			361			322
Provision for credit losses		(3	)		(9	)		(3	)		4			(14	)
Noninterest expense		112			104			108			108			107
Income taxes		91			88			142			93			85
Tax-equivalent adjustment		—			—			—			—			1
Segment earnings	$	148			139			238			156			143
Economic profit	$	41			31			142			64			45
Risk adjusted return on capital		16.14	%		15.27			31.39			20.47			18.14
Economic capital, average	$	3,109			2,997			2,814			2,691			2,501
Cash overhead efficiency ratio (b)		32.14	%		32.56			22.16			29.84			33.06
Average loans, net	$	29,421			28,961			28,353			27,085			25,239
Average core deposits	$	719			690			757			730			743

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

(Continued)

36

Table 5
BUSINESS SEGMENTS

	2005									2004
	Third			Second			First			Fourth			Third
(Dollars in millions)	Quarter			Quarter			Quarter			Quarter			Quarter
TREASURY AND INTERNATIONAL TRADE FINANCE
Net interest income (b)	$	86			86			90			97			87
Fee and other income		185			177			183			186			182
Intersegment revenue		(29	)		(28	)		(30	)		(29	)		(27	)
Total revenue (b)		242			235			243			254			242
Provision for credit losses		—			—			—			—			—
Noninterest expense		164			166			160			162			174
Income taxes		28			26			30			34			23
Tax-equivalent adjustment		—			—			—			—			—
Segment earnings	$	50			43			53			58			45
Economic profit	$	40			33			45			49			36
Risk adjusted return on capital		63.18	%		55.82			78.49			84.95			65.91
Economic capital, average	$	302			300			269			264			260
Cash overhead efficiency ratio (b)		67.61	%		70.89			65.49			64.21			71.29
Average loans, net	$	5,592			5,209			5,167			5,217			5,205
Average core deposits	$	15,249			14,171			13,367			13,721			11,915
INVESTMENT BANKING
Net interest income (b)	$	245			217			265			291			283
Fee and other income		702			514			552			376			505
Intersegment revenue		(22	)		(16	)		(10	)		(16	)		(12	)
Total revenue (b)		925			715			807			651			776
Provision for credit losses		—			1			—			—			(1	)
Noninterest expense		533			441			465			389			401
Income taxes		123			71			99			65			109
Tax-equivalent adjustment		21			27			28			30			29
Segment earnings	$	248			175			215			167			238
Economic profit	$	182			112			156			113			188
Risk adjusted return on capital		44.14	%		31.30			42.32			35.30			51.50
Economic capital, average	$	2,192			2,189			2,029			1,851			1,842
Cash overhead efficiency ratio (b)		57.68	%		61.38			57.85			59.66			51.84
Average loans, net	$	3,770			3,702			3,299			2,925			2,410
Average core deposits	$	8,829			7,634			6,788			6,558			5,939

(Continued)

37

Table 5
BUSINESS SEGMENTS

	2005									2004
	Third			Second			First			Fourth			Third
(Dollars in millions)	Quarter			Quarter			Quarter			Quarter			Quarter
PARENT
Net interest income (a)	$	155			180			226			156			172
Fee and other income		79			130			(3	)		100			(53	)
Intersegment revenue		—			1			1			—			1
Total revenue (a)		234			311			224			256			120
Provision for credit losses		2			(10	)		(17	)		(2	)		(15	)
Noninterest expense		182			164			250			191			215
Minority interest		105			85			74			83			65
Income tax benefits		(121	)		(74	)		(96	)		(94	)		(137	)
Tax-equivalent adjustment		21			16			23			19			23
Segment earnings (loss)	$	45			130			(10	)		59			(31	)
Economic profit	$	34			115			(23	)		55			(50	)
Risk adjusted return on capital		16.06	%		29.89			7.64			20.49			2.55
Economic capital, average	$	2,529			2,436			2,418			2,301			2,253
Cash overhead efficiency ratio (a)		35.05	%		17.88			60.27			29.96			96.32
Lending commitments	$	433			430			398			408			319
Average loans, net		11,502			9,952			11,433			1,598			(836	)
Average core deposits	$	3,309			2,985			3,099			3,212			2,486
FTE employees		23,499			23,874			23,970			24,170			22,066

(a) Tax-equivalent.

(Continued)

38

Table 5
BUSINESS SEGMENTS

	Three Months Ended September 30, 2005
															Net Merger-
									Corporate						Related
									and						and
	General			Capital			Wealth		Investment						Restructuring
(Dollars in millions)	Bank			Management			Management		Bank			Parent			Expenses (b)			Total
CONSOLIDATED
Net interest income (a)	$	2,434			171			147		549			155			(53	)		3,403
Fee and other income		760			1,201			191		1,011			79			—			3,242
Intersegment revenue		56			(12	)		1		(45	)		—			—			—
Total revenue (a)		3,250			1,360			339		1,515			234			(53	)		6,645
Provision for credit losses		77			—			6		(3	)		2			—			82
Noninterest expense		1,584			1,111			235		809			182			83			4,004
Minority interest		—			—			—		—			105			(1	)		104
Income taxes (benefits)		573			92			35		242			(121	)		(31	)		790
Tax-equivalent adjustment		10			1			—		21			21			(53	)		—
Net income	$	1,006			156			63		446			45			(51	)		1,665
Economic profit	$	775			117			48		263			34			—			1,237
Risk adjusted return on capital		54.85	%		44.22			47.41		29.63			16.06			—			39.73
Economic capital, average	$	7,019			1,399			528		5,603			2,529			—			17,078
Cash overhead efficiency ratio (a)		48.74	%		81.86			68.99		53.39			35.05			—			57.06
Lending commitments	$	105,598			184			5,574		93,938			433			—			205,727
Average loans, net		163,801			694			14,180		38,783			11,502			—			228,960
Average core deposits	$	208,718			30,700			13,224		24,797			3,309			—			280,748
FTE employees		41,609			18,340			4,660		4,799			23,499			—			92,907

	Three Months Ended September 30, 2004
																Net Merger-
										Corporate						Related
										and						and
	General			Capital			Wealth			Investment						Restructuring
(Dollars in millions)	Bank			Management			Management			Bank			Parent			Expenses (b)			Total
CONSOLIDATED
Net interest income (a)	$	1,985			155			129			587			172			(63	)		2,965
Fee and other income		601			1,124			143			786			(53	)		—			2,601
Intersegment revenue		43			(13	)		2			(33	)		1			—			—
Total revenue (a)		2,629			1,266			274			1,340			120			(63	)		5,566
Provision for credit losses		74			—			(1	)		(15	)		(15	)		—			43
Noninterest expense		1,362			1,094			191			682			215			127			3,671
Minority interest		—			—			—			—			65			(37	)		28
Income taxes (benefits)		423			62			31			217			(137	)		(35	)		561
Tax-equivalent adjustment		10			—			—			30			23			(63	)		—
Net income (loss)	$	760			110			53			426			(31	)		(55	)		1,263
Economic profit	$	592			74			36			269			(50	)		—			921
Risk adjusted return on capital		57.00	%		33.27			42.66			34.19			2.55			—			37.69
Economic capital, average	$	5,123			1,312			447			4,603			2,253			—			13,738
Cash overhead efficiency ratio (a)		51.80	%		86.39			69.93			50.86			96.32			—			61.20
Lending commitments	$	76,592			107			4,390			75,732			319			—			157,140
Average loans, net		124,687			643			11,204			32,854			(836	)		—			168,552
Average core deposits	$	170,188			29,547			12,171			18,597			2,486			—			232,989
FTE employees		34,519			19,699			3,671			4,548			22,066			—			84,503

(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)

39

Table 5
BUSINESS SEGMENTS

	Nine Months Ended
	September 30,
(Dollars in millions)	2005			2004
GENERAL BANK COMBINED (a)
Net interest income (b)	$	7,203			5,728
Fee and other income		2,131			1,772
Intersegment revenue		148			121
Total revenue (b)		9,482			7,621
Provision for credit losses		202			207
Noninterest expense		4,643			3,990
Income taxes		1,672			1,212
Tax-equivalent adjustment		30			31
Segment earnings	$	2,935			2,181
Economic profit	$	2,229			1,655
Risk adjusted return on capital		53.46	%		53.63
Economic capital, average	$	7,021			5,187
Cash overhead efficiency ratio (b)		48.97	%		52.35
Lending commitments	$	105,598			76,592
Average loans, net		161,685			121,696
Average core deposits	$	205,460			165,798
FTE employees		41,609			34,519
COMMERCIAL
Net interest income (b)	$	2,241			1,689
Fee and other income		316			327
Intersegment revenue		103			75
Total revenue (b)		2,660			2,091
Provision for credit losses		37			39
Noninterest expense		911			826
Income taxes		598			414
Tax-equivalent adjustment		30			31
Segment earnings	$	1,084			781
Economic profit	$	653			498
Risk adjusted return on capital		34.81	%		39.42
Economic capital, average	$	3,670			2,340
Cash overhead efficiency ratio (b)		34.23	%		39.50
Average loans, net	$	77,385			51,586
Average core deposits	$	42,484			37,643
RETAIL AND SMALL BUSINESS
Net interest income (b)	$	4,962			4,039
Fee and other income		1,815			1,445
Intersegment revenue		45			46
Total revenue (b)		6,822			5,530
Provision for credit losses		165			168
Noninterest expense		3,732			3,164
Income taxes		1,074			798
Tax-equivalent adjustment		—			—
Segment earnings	$	1,851			1,400
Economic profit	$	1,576			1,157
Risk adjusted return on capital		73.88	%		65.30
Economic capital, average	$	3,351			2,847
Cash overhead efficiency ratio (b)		54.72	%		57.21
Average loans, net	$	84,300			70,110
Average core deposits	$	162,976			128,155

(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)

40

Table 5
BUSINESS SEGMENTS

	Nine Months Ended
	September 30,
(Dollars in millions)	2005			2004
CAPITAL MANAGEMENT COMBINED (a)
Net interest income (b)	$	486			410
Fee and other income		3,578			3,703
Intersegment revenue		(36	)		(37	)
Total revenue (b)		4,028			4,076
Provision for credit losses		—			—
Noninterest expense		3,293			3,456
Income taxes		270			225
Tax-equivalent adjustment		1			—
Segment earnings	$	464			395
Economic profit	$	349			282
Risk adjusted return on capital		44.32	%		38.28
Economic capital, average	$	1,401			1,379
Cash overhead efficiency ratio (b)		81.78	%		84.78
Lending commitments	$	184			107
Average loans, net		675			508
Average core deposits	$	31,194			24,558
FTE employees		18,340			19,699
Assets under management	$	256,474			249,238
ASSET MANAGEMENT
Net interest income (b)	$	37			31
Fee and other income		797			810
Intersegment revenue		(2	)		(1	)
Total revenue (b)		832			840
Provision for credit losses		—			—
Noninterest expense		665			675
Income taxes		61			60
Tax-equivalent adjustment		—			—
Segment earnings	$	106			105
Economic profit	$	86			86
Risk adjusted return on capital		58.14	%		59.54
Economic capital, average	$	243			236
Cash overhead efficiency ratio (b)		79.95	%		80.33
Average loans, net	$	344			246
Average core deposits	$	1,944			1,440

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

(Continued)

41

Table 5
BUSINESS SEGMENTS

	Nine Months Ended
	September 30,
(Dollars in millions)	2005			2004
RETAIL BROKERAGE SERVICES
Net interest income (b)	$	448			378
Fee and other income		2,790			2,906
Intersegment revenue		(33	)		(36	)
Total revenue (b)		3,205			3,248
Provision for credit losses		—			—
Noninterest expense		2,643			2,808
Income taxes		207			159
Tax-equivalent adjustment		1			—
Segment earnings	$	354			281
Economic profit	$	259			187
Risk adjusted return on capital		40.91	%		32.77
Economic capital, average	$	1,159			1,145
Cash overhead efficiency ratio (b)		82.51	%		86.42
Average loans, net	$	331			262
Average core deposits	$	29,250			23,118
OTHER
Net interest income (b)	$	1			1
Fee and other income		(9	)		(13	)
Intersegment revenue		(1	)		—
Total revenue (b)		(9	)		(12	)
Provision for credit losses		—			—
Noninterest expense		(15	)		(27	)
Income taxes		2			6
Tax-equivalent adjustment		—			—
Segment earnings	$	4			9
Economic profit	$	4			9
Risk adjusted return on capital		—	%		—
Economic capital, average	$	(1)			(2	)
Cash overhead efficiency ratio (b)		—	%		—
Average loans, net	$	—			—
Average core deposits	$	—			—

(Continued)

42

Table 5
BUSINESS SEGMENTS

	Nine Months Ended
	September 30,
(Dollars in millions)	2005			2004
WEALTH MANAGEMENT
Net interest income (a)	$	430			359
Fee and other income		520			441
Intersegment revenue		4			4
Total revenue (a)		954			804
Provision for credit losses		5			(1	)
Noninterest expense		645			571
Income taxes		111			85
Tax-equivalent adjustment		—			—
Segment earnings	$	193			149
Economic profit	$	144			98
Risk adjusted return on capital		49.20	%		39.98
Economic capital, average	$	504			449
Cash overhead efficiency ratio (a)		67.54	%		71.06
Lending commitments	$	5,574			4,390
Average loans, net		13,546			10,671
Average core deposits	$	13,227			11,697
FTE employees		4,660			3,671

(a) Tax-equivalent.

(Continued)

43

Table 5
BUSINESS SEGMENTS

	Nine Months Ended
	September 30,
(Dollars in millions)	2005			2004
CORPORATE AND INVESTMENT BANK COMBINED (a)
Net interest income (b)	$	1,661			1,772
Fee and other income		2,779			2,241
Intersegment revenue		(118	)		(90	)
Total revenue (b)		4,322			3,923
Provision for credit losses		(14	)		(45	)
Noninterest expense		2,253			1,920
Income taxes		698			660
Tax-equivalent adjustment		76			93
Segment earnings	$	1,309			1,295
Economic profit	$	782			820
Risk adjusted return on capital		30.36	%		35.10
Economic capital, average	$	5,402			4,543
Cash overhead efficiency ratio (b)		52.12	%		48.93
Lending commitments	$	93,938			75,732
Average loans, net		37,832			30,579
Average core deposits	$	22,749			17,506
FTE employees		4,799			4,548
CORPORATE LENDING
Net interest income (b)	$	672			761
Fee and other income		466			389
Intersegment revenue		17			17
Total revenue (b)		1,155			1,167
Provision for credit losses		(15	)		(45	)
Noninterest expense		324			318
Income taxes		321			334
Tax-equivalent adjustment		—			1
Segment earnings	$	525			559
Economic profit	$	214			266
Risk adjusted return on capital		20.60	%		25.49
Economic capital, average	$	2,974			2,453
Cash overhead efficiency ratio (b)		28.06	%		27.24
Average loans, net	$	28,916			23,745
Average core deposits	$	722			793

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

(Continued)

44

Table 5
BUSINESS SEGMENTS

	Nine Months Ended
	September 30,
(Dollars in millions)	2005			2004
TREASURY AND INTERNATIONAL TRADE FINANCE
Net interest income (b)	$	262			259
Fee and other income		545			540
Intersegment revenue		(87	)		(80	)
Total revenue (b)		720			719
Provision for credit losses		—			—
Noninterest expense		490			514
Income taxes		84			74
Tax-equivalent adjustment		—			—
Segment earnings	$	146			131
Economic profit	$	118			106
Risk adjusted return on capital		65.32	%		67.75
Economic capital, average	$	291			250
Cash overhead efficiency ratio (b)		67.96	%		71.45
Average loans, net	$	5,324			4,805
Average core deposits	$	14,269			11,550
INVESTMENT BANKING
Net interest income (b)	$	727			752
Fee and other income		1,768			1,312
Intersegment revenue		(48	)		(27	)
Total revenue (b)		2,447			2,037
Provision for credit losses		1			—
Noninterest expense		1,439			1,088
Income taxes		293			252
Tax-equivalent adjustment		76			92
Segment earnings	$	638			605
Economic profit	$	450			448
Risk adjusted return on capital		39.19	%		43.47
Economic capital, average	$	2,137			1,840
Cash overhead efficiency ratio (b)		58.82	%		53.39
Average loans, net	$	3,592			2,029
Average core deposits	$	7,758			5,163

(Continued)

45

Table 5
BUSINESS SEGMENTS

	Nine Months Ended
	September 30,
(Dollars in millions)	2005			2004
PARENT
Net interest income (a)	$	561			585
Fee and other income		206			(182	)
Intersegment revenue		2			2
Total revenue (a)		769			405
Provision for credit losses		(25	)		(13	)
Noninterest expense		596			567
Minority interest		264			214
Income tax benefits		(291	)		(325	)
Tax-equivalent adjustment		60			66
Segment earnings (loss)	$	165			(104	)
Economic profit	$	126			(126	)
Risk adjusted return on capital		17.89	%		3.62
Economic capital, average	$	2,462			2,256
Cash overhead efficiency ratio (a)		35.51	%		61.86
Lending commitments	$	433			319
Average loans, net		10,963			355
Average core deposits	$	3,132			2,305
FTE employees		23,499			22,066

(a) Tax-equivalent.

(Continued)

46

Table 5
BUSINESS SEGMENTS

	Nine Months Ended September 30, 2005
															Net Merger-
									Corporate						Related
									and						and
	General			Capital			Wealth		Investment						Restructuring
(Dollars in millions)	Bank			Management			Management		Bank			Parent			Expenses (b)			Total
CONSOLIDATED
Net interest income (a)	$	7,203			486			430		1,661			561			(167	)		10,174
Fee and other income		2,131			3,578			520		2,779			206			—			9,214
Intersegment revenue		148			(36	)		4		(118	)		2			—			—
Total revenue (a)		9,482			4,028			954		4,322			769			(167	)		19,388
Provision for credit losses		202			—			5		(14	)		(25	)		—			168
Noninterest expense		4,643			3,293			645		2,253			596			234			11,664
Minority interest		—			—			—		—			264			(25	)		239
Income taxes (benefits)		1,672			270			111		698			(291	)		(79	)		2,381
Tax-equivalent adjustment		30			1			—		76			60			(167	)		—
Net income	$	2,935			464			193		1,309			165			(130	)		4,936
Economic profit	$	2,229			349			144		782			126			—			3,630
Risk adjusted return on capital		53.46	%		44.32			49.20		30.36			17.89			—			39.92
Economic capital, average	$	7,021			1,401			504		5,402			2,462			—			16,790
Cash overhead efficiency ratio (a)		48.97	%		81.78			67.54		52.12			35.51			—			56.80
Lending commitments	$	105,598			184			5,574		93,938			433			—			205,727
Average loans, net		161,685			675			13,546		37,832			10,963			—			224,701
Average core deposits	$	205,460			31,194			13,227		22,749			3,132			—			275,762
FTE employees		41,609			18,340			4,660		4,799			23,499			—			92,907

	Nine Months Ended September 30, 2004
																Net Merger-
										Corporate						Related
										and						and
	General			Capital			Wealth			Investment						Restructuring
(Dollars in millions)	Bank			Management			Management			Bank			Parent			Expenses (b)			Total
CONSOLIDATED
Net interest income (a)	$	5,728			410			359			1,772			585			(190	)		8,664
Fee and other income		1,772			3,703			441			2,241			(182	)		—			7,975
Intersegment revenue		121			(37	)		4			(90	)		2			—			—
Total revenue (a)		7,621			4,076			804			3,923			405			(190	)		16,639
Provision for credit losses		207			—			(1	)		(45	)		(13	)		—			148
Noninterest expense		3,990			3,456			571			1,920			567			328			10,832
Minority interest		—			—			—			—			214			(84	)		130
Income taxes (benefits)		1,212			225			85			660			(325	)		(94	)		1,763
Tax-equivalent adjustment		31			—			—			93			66			(190	)		—
Net income (loss)	$	2,181			395			149			1,295			(104	)		(150	)		3,766
Economic profit	$	1,655			282			98			820			(126	)		—			2,729
Risk adjusted return on capital		53.63	%		38.28			39.98			35.10			3.62			—			37.39
Economic capital, average	$	5,187			1,379			449			4,543			2,256			—			13,814
Cash overhead efficiency ratio (a)		52.35	%		84.78			71.06			48.93			61.86			—			60.53
Lending commitments	$	76,592			107			4,390			75,732			319			—			157,140
Average loans, net		121,696			508			10,671			30,579			355			—			163,809
Average core deposits	$	165,798			24,558			11,697			17,506			2,305			—			221,864
FTE employees		34,519			19,699			3,671			4,548			22,066			—			84,503

(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.

47

Table 6
NET TRADING REVENUE — INVESTMENT BANKING (a)

	2005						2004
	Third		Second		First		Fourth			Third
(In millions)	Quarter		Quarter		Quarter		Quarter			Quarter
Net interest income(Tax-equivalent)	$	124		94		132		164			156
Trading accounts profits (losses)		118		29		99		(7	)		(43	)
Other fee income		66		73		67		73			57
Total net trading revenue(Tax-equivalent)	$	308		196		298		230			170

(a) Certain amounts presented in periods prior to the third quarter of 2005 have been reclassified to conform to the presentation in the third quarter of 2005.

Table 7
SELECTED RATIOS

	Nine Months Ended
	September 30,					2005						2004
						Third		Second		First		Fourth		Third
	2005			2004		Quarter		Quarter		Quarter		Quarter		Quarter
PERFORMANCE RATIOS (a)
Assets to stockholders’ equity		10.70	X		12.53		10.81		10.68		10.60		11.08		12.77
Return on assets		1.31	%		1.22		1.29		1.31		1.31		1.22		1.18
Return on common stockholders’ equity		13.97			15.33		13.95		14.04		13.92		13.50		15.12
Return on total stockholders’ equity		13.97	%		15.33		13.95		14.04		13.92		13.50		15.12
DIVIDEND PAYOUT RATIOS
Common shares		46.13	%		42.11		48.11		44.23		45.54		48.42		41.67
Preferred and common shares		46.13	%		42.11		48.11		44.23		45.54		48.42		41.67

(a) Based on average balances and net income.

Table 8
TRADING ACCOUNT ASSETS AND LIABILITIES

	2005						2004
	Third		Second		First		Fourth		Third
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
TRADING ACCOUNT ASSETS
U.S. Treasury	$	1,120		2,815		5,822		2,768		3,374
U.S. Government agencies		2,692		2,882		3,414		3,799		3,461
State, county and municipal		1,998		1,874		1,587		868		966
Mortgage-backed securities		4,470		5,112		4,269		7,486		6,336
Other asset-backed securities		9,360		8,523		7,303		5,600		6,891
Corporate bonds and debentures		5,598		5,604		6,284		6,920		6,634
Equity securities		5,657		5,297		4,696		4,166		3,921
Derivative financial instruments		11,144		11,110		10,886		10,658		10,676
Sundry		7,607		3,302		2,888		3,667		2,870
Total trading account assets	$	49,646		46,519		47,149		45,932		45,129
TRADING ACCOUNT LIABILITIES
Securities sold short		9,914		9,953		13,020		12,258		13,285
Derivative financial instruments		9,901		9,874		9,398		9,451		9,419
Total trading account liabilities	$	19,815		19,827		22,418		21,709		22,704

48

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

	2005						2004
	Third		Second		First		Fourth		Third
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
ON-BALANCE SHEET LOAN PORTFOLIO COMMERCIAL
Commercial, financial and agricultural	$	83,241		80,528		78,669		75,095		59,271
Real estate — construction and other		13,653		13,216		12,713		12,673		6,985
Real estate — mortgage		19,864		19,724		20,707		20,742		14,771
Lease financing		25,022		24,836		25,013		25,000		24,042
Foreign		8,888		7,549		7,504		7,716		7,402
Total commercial		150,668		145,853		144,606		141,226		112,471
CONSUMER
Real estate secured		80,128		76,213		74,631		74,161		54,965
Student loans		11,458		10,828		10,795		10,468		10,207
Installment loans		6,745		6,783		6,808		7,684		6,410
Total consumer		98,331		93,824		92,234		92,313		71,582
Total loans		248,999		239,677		236,840		233,539		184,053
Unearned income		9,266		9,390		9,574		9,699		9,549
Loans, net(On-balance sheet)	$	239,733		230,287		227,266		223,840		174,504
MANAGED PORTFOLIO (a)
COMMERCIAL
On-balance sheet loan portfolio	$	150,668		145,853		144,606		141,226		112,471
Securitized loans — off-balance sheet		1,263		1,293		1,402		1,734		1,823
Loans held for sale		4,039		1,783		1,117		2,112		1,993
Total commercial		155,970		148,929		147,125		145,072		116,287
CONSUMER
Real estate secured
On-balance sheet loan portfolio		80,128		76,213		74,631		74,161		54,965
Securitized loans — off-balance sheet		9,255		10,199		6,979		7,570		6,567
Securitized loans included in securities		4,218		4,426		4,626		4,838		8,909
Loans held for sale		12,660		11,923		11,925		10,452		15,602
Total real estate secured		106,261		102,761		98,161		97,021		86,043
Student
On-balance sheet loan portfolio		11,458		10,828		10,795		10,468		10,207
Securitized loans — off-balance sheet		341		382		423		463		554
Loans held for sale		—		16		65		128		160
Total student		11,799		11,226		11,283		11,059		10,921
Installment
On-balance sheet loan portfolio		6,745		6,783		6,808		7,684		6,410
Securitized loans — off-balance sheet		2,228		2,662		1,930		2,184		2,489
Securitized loans included in securities		146		163		155		195		195
Loans held for sale		1,339		809		1,066		296		—
Total installment		10,458		10,417		9,959		10,359		9,094
Total consumer		128,518		124,404		119,403		118,439		106,058
Total managed portfolio	$	284,488		273,333		266,528		263,511		222,345
SERVICING PORTFOLIO (b)
Commercial	$	158,650		152,923		140,493		136,578		130,313
Consumer	$	57,391		53,261		46,552		40,053		31,549

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

49

Table 10
LOANS HELD FOR SALE

	2005									2004
	Third			Second			First			Fourth			Third
(In millions)	Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period	$	14,531			14,173			12,988			17,755			16,257
CORE BUSINESS ACTIVITY (a)
Core business activity, beginning of period		14,447			13,715			12,293			17,720			16,200
Balance of acquired entities at purchase date		—			—			—			653			—
Originations/purchases		15,157			10,577			7,692			12,941			8,108
Transfer to (from) loans held for sale, net (b)		(562	)		(583	)		462			(8,968	)		(190	)
Lower of cost or market value adjustments		—			(1	)		1			(1	)		(1	)
Performing loans sold or securitized		(8,604	)		(6,999	)		(5,109	)		(7,033	)		(4,142	)
Nonperforming loans sold		—			—			—			—			—
Other, principally payments		(2,424	)		(2,262	)		(1,624	)		(3,019	)		(2,255	)
Core business activity, end of period		18,014			14,447			13,715			12,293			17,720
PORTFOLIO MANAGEMENT ACTIVITY (a)
Portfolio management activity, beginning of period		84			458			695			35			57
Transfers to (from) loans held for sale, net Performing loans		1			(15	)		96			602			12
Nonperforming loans		—			—			25			125			—
Lower of cost or market value adjustments		—			—			—			—			1
Performing loans sold		(19	)		(297	)		(295	)		(12	)		(21	)
Nonperforming loans sold		(37	)		(13	)		(6	)		—			(6	)
Allowance for loan losses related to loans transferred to loans held for sale		—			—			(5	)		(51	)		—
Other, principally payments		(5	)		(49	)		(52	)		(4	)		(8	)
Portfolio management activity, end of period		24			84			458			695			35
Balance, end of period (c)	$	18,038			14,531			14,173			12,988			17,755

(a)	Core business activity means we originate loans with the intent to sell them to third parties, and portfolio management activity means we look for market opportunities to reduce risk in the loan portfolio by transferring loans to loans held for sale.
(b)	The first quarter of 2005 has been reduced by a $5 million transfer from the allowance for loan losses related to installment loans.
(c)	Nonperforming assets included in loans held for sale at September 30, June 30, and March 31, 2005, and at December 31, and September 30, 2004, were $59 million, $111 million, $159 million, $157 million and $57 million, respectively.

50

Table 11
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS

	2005									2004
	Third			Second			First			Fourth			Third
(In millions)	Quarter			Quarter			Quarter			Quarter			Quarter
ALLOWANCE FOR LOAN LOSSES (a)
Balance, beginning of period	$	2,718			2,732			2,757			2,324			2,331
Provision for credit losses		74			48			33			95			63
Provision for credit losses relating to loans transferred to loans held for sale or sold		12			—			1			(6	)		(8	)
Balance of acquired entities at purchase date		—			—			—			510			—
Allowance relating to loans acquired, transferred to loans held for sale or sold		(26	)		(11	)		(13	)		(51	)		3
Net charge-offs		(59	)		(51	)		(46	)		(115	)		(65	)
Balance, end of period	$	2,719			2,718			2,732			2,757			2,324
as a % of loans, net		1.13	%		1.18			1.20			1.23			1.33
as a % of nonaccrual and restructured loans (b)		347	%		332			300			289			291
as a % of nonperforming assets (b)		303	%		284			262			251			258
LOAN LOSSES
Commercial, financial and agricultural	$	43			35			26			82			50
Commercial real estate — construction and mortgage		9			—			1			4			3
Consumer		71			75			67			74			70
Total loan losses		123			110			94			160			123
LOAN RECOVERIES
Commercial, financial and agricultural		35			25			26			27			41
Commercial real estate — construction and mortgage		2			1			—			—			1
Consumer		27			33			22			18			16
Total loan recoveries		64			59			48			45			58
Net charge-offs	$	59			51			46			115			65
Commercial loan net charge-offs as % of average commercial loans, net (c)		0.05	%		0.03			—			0.20			0.05
Consumer loan net charge-offs as % of average consumer loans, net (c)		0.18			0.18			0.19			0.28			0.30
Total net charge-offs as % of average loans, net (c)		0.10	%		0.09			0.08			0.23			0.15
NONPERFORMING ASSETS
Nonaccrual loans
Commercial, financial and agricultural	$	445			497			527			585			534
Commercial real estate — construction and mortgage		120			88			131			127			42
Consumer real estate secured		209			221			239			230			211
Installment loans		10			13			13			13			11
Total nonaccrual loans		784			819			910			955			798
Foreclosed properties (d)		112			138			132			145			101
Total nonperforming assets	$	896			957			1,042			1,100			899
Nonperforming loans included in loans held for sale (e)	$	59			111			159			157			57
Nonperforming assets included in loans and in loans held for sale	$	955			1,068			1,201			1,257			956
as % of loans, net, and foreclosed properties (b)		0.37	%		0.42			0.46			0.49			0.51
as % of loans, net, foreclosed properties and loans held for sale (e)		0.37	%		0.44			0.50			0.53			0.50
Accruing loans past due 90 days	$	525			521			510			522			428

(a)	See Table 12 for information related to the reserve for unfunded lending commitments.
(b)	These ratios do not include nonperforming loans included in loans held for sale.
(c)	Annualized.
(d)	Restructured loans are not significant.
(e)	These ratios reflect nonperforming loans included in loans held for sale. Loans held for sale are recorded at the lower of cost or market value, and accordingly, the amounts shown and included in the ratios are net of the transferred allowance for loan losses and the lower of cost or market value adjustments.

51

Table 12
RESERVE FOR UNFUNDED LENDING COMMITMENTS

	2005							2004
	Third			Second		First		Fourth		Third
(In millions)	Quarter			Quarter		Quarter		Quarter		Quarter
RESERVE FOR UNFUNDED LENDING COMMITMENTS
Balance, beginning of period	$	158			156		154		134		146
Provision for credit losses		(4	)		2		2		20		(12	)
Balance, end of period	$	154			158		156		154		134

Table 13
NONACCRUAL LOAN ACTIVITY (a)

	2005									2004
	Third			Second			First			Fourth			Third
(In millions)	Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period	$	819			910			955			798			863
Commercial nonaccrual loan activity
Commercial nonaccrual loans, beginning of period		585			658			712			576			643
Balance of acquired entities at purchase date		—			—			—			321			—
New nonaccrual loans and advances		229			195			210			149			143
Gross charge-offs		(52	)		(35	)		(27	)		(86	)		(53	)
Transfers to loans held for sale		—			—			(25	)		(121	)		—
Transfers to other real estate owned		(1	)		(25	)		—			—			(1	)
Sales		(93	)		(83	)		(46	)		(24	)		(19	)
Other, principally payments		(103	)		(125	)		(166	)		(103	)		(137	)
Net commercial nonaccrual loan activity		(20	)		(73	)		(54	)		(185	)		(67	)
Commercial nonaccrual loans, end of period		565			585			658			712			576
Consumer nonaccrual loan activity
Consumer nonaccrual loans, beginning of period		234			252			243			222			220
Balance of acquired entities at purchase date		—			—			—			21			—
New nonaccrual loans, advances and other, net		(15	)		(18	)		9			4			2
Transfers to loans held for sale		—			—			—			(4	)		—
Net consumer nonaccrual loan activity		(15	)		(18	)		9			—			2
Consumer nonaccrual loans, end of period		219			234			252			243			222
Balance, end of period	$	784			819			910			955			798

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

52

Table 14
GOODWILL AND OTHER INTANGIBLE ASSETS

	2005						2004
	Third		Second		First		Fourth		Third
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
Goodwill	$	21,857		21,861		21,635		21,526		11,481
Deposit base		779		861		951		1,048		484
Customer relationships		416		427		387		443		372
Tradename		90		90		90		90		90
Total goodwill and other intangible assets	$	23,142		23,239		23,063		23,107		12,427

	Nine Months Ended September 30, 2005
	Employee			Occupancy
	Termination			and
(In millions)	Benefits			Equipment			Other			Total
ACTIVITY IN THE EXIT COST PURCHASE ACCOUNTING ADJUSTMENT ACCRUAL
Wachovia/SouthTrust — November 1, 2004
Balance, December 31, 2004	$	167			—			4			171
Purchase accounting adjustments		47			61			33			141
Cash payments		(77	)		(24	)		(32	)		(133	)
Noncash write-downs		—			(20	)		—			(20	)
Balance, September 30, 2005	$	137			17			5			159

	Nine Months Ended September 30, 2005
	Employee			Occupancy
	Termination			and
(In millions)	Benefits			Equipment			Other			Total
ACTIVITY IN THE EXIT COST PURCHASE ACCOUNTING ADJUSTMENT ACCRUAL
Wachovia Securities retail brokerage — July 1, 2003
Balance, December 31, 2004	$	88			228			5			321
Purchase accounting adjustments		(9	)		(42	)		—			(51	)
Cash payments		(74	)		(126	)		(3	)		(203	)
Noncash write-downs		—			(60	)		—			(60	)
Balance, September 30, 2005	$	5			—			2			7

53

Table 15
DEPOSITS

	2005						2004
	Third		Second		First		Fourth		Third
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
CORE DEPOSITS
Noninterest-bearing	$	68,402		63,079		61,626		64,197		52,524
Savings and NOW accounts		78,013		79,957		81,485		83,678		73,477
Money market accounts		98,838		92,869		93,840		91,184		84,075
Other consumer time		42,479		39,376		36,932		35,529		27,239
Total core deposits		287,732		275,281		273,883		274,588		237,315
OTHER DEPOSITS
Foreign		15,736		15,029		13,293		9,881		7,917
Other time		16,971		9,600		10,481		10,584		7,749
Total deposits	$	320,439		299,910		297,657		295,053		252,981

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

	September 30, 2005
(In millions)
MATURITY OF
3 months or less	$	8,700
Over 3 months through 6 months		2,883
Over 6 months through 12 months		3,639
Over 12 months		9,043
Total time deposits in amounts of $100,000 or more	$	24,265

54

Table 17
LONG-TERM DEBT

	2005						2004
	Third		Second		First		Fourth		Third
(In millions)	Quarter		Quarter		Quarter		Quarter		Quarter
NOTES AND DEBENTURES ISSUED BY THE PARENT COMPANY
Notes
3.50% to 6.63%, due 2006 to 2020	$	5,724		7,575		6,825		7,275		6,657
Floating rate, due 2006 to 2012		7,149		7,149		6,749		6,400		4,400
Equity-linked, due 2005 to 2010		168		128		107		73		59
Floating rate extendible, due 2005		—		—		10		10		10
Subordinated notes
6.30%, Putable/Callable, due 2028		200		200		200		200		200
6.605%, due 2025		250		250		250		250		250
4.875% to 7.50%, due 2006 to 2035		5,787		5,738		5,994		6,000		5,973
Subordinated debentures
6.55% to 7.574%, due 2026 to 2035		795		795		795		795		795
Hedge-related basis adjustments		97		405		172		412		538
Total notes and debentures issued by the Parent Company		20,170		22,240		21,102		21,415		18,882
NOTES ISSUED BY SUBSIDIARIES
Notes, primarily notes issued under global bank note programs, varying rates and terms to 2040		4,386		4,922		5,238		5,124		4,124
Subordinated notes
Bank, 4.09% to 7.875%, due 2006 to 2036		6,549		6,849		6,849		5,174		3,350
Floating rate, due 2013		417		417		417		417		417
7.80% to 7.95%, due 2006 to 2007		250		250		250		249		249
6.75%, due 2006		200		200		200		375		375
Total notes issued by subsidiaries		11,802		12,638		12,954		11,339		8,515
OTHER DEBT
Junior subordinated debentures, floating rate, due 2026 to 2029		3,106		3,106		3,106		3,106		3,106
Collateralized notes, floating rate, due 2006 to 2007		4,420		4,420		4,420		4,420		4,420
Advances from the Federal Home Loan Bank		4,145		4,970		5,001		5,001		5,001
Preferred units issued by subsidiaries		852		322		102		57		57
Capitalized leases		737		740		743		748		750
Mortgage notes and other debt of subsidiaries		525		324		483		483		460
Hedge-related basis adjustments		89		246		21		190		253
Total other debt		13,874		14,128		13,876		14,005		14,047
Total long-term debt	$	45,846		49,006		47,932		46,759		41,444

55

Table 18
CHANGES IN STOCKHOLDERS’ EQUITY

	2005									2004
	Third			Second			First			Fourth			Third
(In millions)	Quarter			Quarter			Quarter			Quarter			Quarter
Balance, beginning of period	$	47,904			46,467			47,317			33,897			32,646
Comprehensive income
Net income		1,665			1,650			1,621			1,448			1,263
Minimum pension liability		—			—			—			(65	)		—
Net unrealized gain (loss) on debt and equity securities		(848	)		607			(786	)		(132	)		744
Net unrealized gain (loss) on derivative financial instruments		(9	)		5			(22	)		(72	)		(221	)
Total comprehensive income		808			2,262			813			1,179			1,786
Purchases of common stock		(1,305	)		(247	)		(1,099	)		(1,334	)		(289	)
Common stock issued for
Stock options and restricted stock		73			234			292			315			192
Acquisitions		3			—			—			14,000			—
Deferred income taxes on subsidiary stock		—			—			—			(87	)		—
Deferred compensation, net		67			(87	)		(129	)		82			84
Cash dividends on common shares		(793	)		(725	)		(727	)		(735	)		(522	)
Balance, end of period	$	46,757			47,904			46,467			47,317			33,897

Table 19
CAPITAL RATIOS

	2005							2004
	Third			Second		First		Fourth		Third
(In millions)	Quarter			Quarter		Quarter		Quarter		Quarter
CONSOLIDATED CAPITAL RATIOS (a)
Qualifying capital
Tier 1 capital	$	28,993			29,176		28,519		28,583		25,514
Total capital		42,183			41,791		41,093		39,633		34,342
Adjusted risk-weighted assets		390,843			371,511		360,516		356,766		306,040
Adjusted leverage ratio assets	$	486,865			478,524		475,845		448,205		410,790
Ratios
Tier 1 capital		7.42	%		7.85		7.91		8.01		8.34
Total capital		10.79			11.25		11.40		11.11		11.22
Leverage		5.96			6.10		5.99		6.38		6.21
STOCKHOLDERS’ EQUITY TO ASSETS
Quarter-end		8.78			9.36		9.17		9.59		7.76
Average		9.25	%		9.36		9.44		9.03		7.83
BANK CAPITAL RATIOS
Tier 1 capital
Wachovia Bank, National Association		7.55	%		7.95		8.02		7.86		7.93
Wachovia Bank of Delaware, National Association		13.59			14.09		15.13		15.76		17.48
Total capital
Wachovia Bank, National Association		11.07			11.79		11.96		11.52		11.52
Wachovia Bank of Delaware, National Association		15.67			16.43		17.58		18.28		20.07
Leverage
Wachovia Bank, National Association		6.27			6.40		6.33		6.15		6.08
Wachovia Bank of Delaware, National Association		11.48	%		11.83		13.25		12.18		10.15

(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.

56

WACHOVIA CORPORATION AND SUBSIDIARIES

NET INTEREST INCOME SUMMARIES

	NINE MONTHS ENDED 2005							NINE MONTHS ENDED 2004
					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	$	2,516		57		3.05	%	$	3,467		33		1.27	%
Federal funds sold and securities purchased under resale agreements		24,467		558		3.05			25,013		219		1.17
Trading account assets (a)		33,577		1,202		4.78			26,402		828		4.18
Securities (a)		114,956		4,407		5.11			99,980		3,654		4.87
Loans (a) (b)
Commercial
Commercial, financial and agricultural		79,469		3,228		5.43			56,805		1,817		4.28
Real estate — construction and other		12,941		534		5.51			6,339		176		3.71
Real estate — mortgage		20,205		861		5.70			15,048		488		4.33
Lease financing		10,246		543		7.07			7,890		541		9.14
Foreign		7,669		206		3.59			7,043		129		2.44
Total commercial		130,530		5,372		5.50			93,125		3,151		4.52
Consumer
Real estate secured		75,861		3,275		5.76			52,525		2,128		5.40
Student loans		11,089		393		4.74			9,666		265		3.66
Installment loans		7,221		361		6.69			8,493		363		5.70
Total consumer		94,171		4,029		5.71			70,684		2,756		5.20
Total loans		224,701		9,401		5.59			163,809		5,907		4.81
Loans held for sale		14,500		604		5.56			15,168		478		4.20
Other earning assets		10,296		378		4.90			11,241		262		3.12
Total earning assets excluding derivatives		425,013		16,607		5.22			345,080		11,381		4.40
Risk management derivatives (c)		—		775		0.24			—		1,128		0.44
Total earning assets including derivatives		425,013		17,382		5.46			345,080		12,509		4.84
Cash and due from banks		12,441							11,123
Other assets		67,724							55,231
Total assets	$	505,178						$	411,434
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits
Savings and NOW accounts		80,041		575		0.96			69,594		241		0.46
Money market accounts		95,420		1,341		1.88			75,881		523		0.92
Other consumer time		38,395		837		2.91			26,881		545		2.71
Foreign		12,728		265		2.78			7,412		69		1.25
Other time		10,966		270		3.29			7,751		107		1.83
Total interest-bearing deposits		237,550		3,288		1.85			187,519		1,485		1.06
Federal funds purchased and securities sold under repurchase agreements		53,954		1,147		2.84			47,340		404		1.14
Commercial paper		13,191		287		2.91			12,099		105		1.16
Securities sold short		10,776		271		3.37			10,464		216		2.76
Other short-term borrowings		6,511		85		1.75			6,165		36		0.76
Long-term debt		47,764		1,557		4.35			38,359		1,146		3.99
Total interest-bearing liabilities excluding derivatives		369,746		6,635		2.40			301,946		3,392		1.50
Risk management derivatives (c)		—		406		0.14			—		263		0.12
Total interest-bearing liabilities including derivatives		369,746		7,041		2.54			301,946		3,655		1.62
Noninterest-bearing deposits		61,906							49,508
Other liabilities		26,301							27,152
Stockholders’ equity		47,225							32,828
Total liabilities and stockholders’ equity	$	505,178						$	411,434
Interest income and rate earned — including derivatives			$	17,382		5.46	%			$	12,509		4.84	%
Interest expense and equivalent rate paid — including derivatives				7,041		2.21					3,655		1.42
Net interest income and margin — including derivatives			$	10,341		3.25	%			$	8,854		3.42	%

(a)	Yields related to securities and loans exempt from federal and state income taxes are stated on a fully tax-equivalent basis. They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 35 percent and applicable state tax rates. Lease financing amounts include related deferred income taxes.
(b)	The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued.
(c)	The rates earned and the rates paid on risk management derivatives are based on off-balance sheet notional amounts. The fair value of these instruments is included in other assets and other liabilities.

57

WACHOVIA CORPORATION AND SUBSIDIARIES

NET INTEREST INCOME SUMMARIES

	THIRD QUARTER 2005							SECOND QUARTER 2005
					Average							Average
			Interest		Rates					Interest		Rates
	Average		Income/		Earned/			Average		Income/		Earned/
(In millions)	Balances		Expense		Paid			Balances		Expense		Paid
ASSETS
Interest-bearing bank balances	$	2,417		21		3.46	%	$	2,649		20		3.07	%
Federal funds sold and securities purchased under resale agreements		24,451		216		3.50			24,676		189		3.08
Trading account assets (a)		33,720		423		5.01			31,879		377		4.73
Securities (a)		114,902		1,461		5.08			115,006		1,469		5.11
Loans (a) (b)
Commercial
Commercial, financial and agricultural		81,488		1,184		5.77			80,213		1,084		5.42
Real estate — construction and other		13,322		201		5.96			12,885		177		5.53
Real estate — mortgage		19,684		302		6.09			20,204		288		5.71
Lease financing		9,979		178		7.15			10,252		183		7.11
Foreign		8,164		80		3.88			7,641		68		3.55
Total commercial		132,637		1,945		5.82			131,195		1,800		5.50
Consumer
Real estate secured		78,088		1,166		5.97			74,799		1,072		5.74
Student loans		11,267		144		5.07			10,995		129		4.72
Installment loans		6,968		124		7.04			6,892		115		6.75
Total consumer		96,323		1,434		5.94			92,686		1,316		5.69
Total loans		228,960		3,379		5.87			223,881		3,116		5.58
Loans held for sale		16,567		244		5.90			14,024		194		5.51
Other earning assets		10,329		138		5.27			10,419		125		4.84
Total earning assets excluding derivatives		431,346		5,882		5.43			422,534		5,490		5.20
Risk management derivatives (c)		—		231		0.21			—		265		0.26
Total earning assets including derivatives		431,346		6,113		5.64			422,534		5,755		5.46
Cash and due from banks		12,277							12,389
Other assets		67,944							68,438
Total assets	$	511,567						$	503,361
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits
Savings and NOW accounts		78,961		220		1.10			80,113		194		0.97
Money market accounts		97,746		529		2.15			94,990		455		1.92
Other consumer time		41,063		325		3.13			38,064		273		2.87
Foreign		15,285		123		3.18			11,857		81		2.75
Other time		10,338		109		4.21			9,999		78		3.09
Total interest-bearing deposits		243,393		1,306		2.13			235,023		1,081		1.84
Federal funds purchased and securities sold under repurchase agreements		56,426		460		3.24			53,984		375		2.79
Commercial paper		12,664		108		3.39			13,365		97		2.91
Securities sold short		9,040		77		3.38			10,648		92		3.49
Other short-term borrowings		6,471		29		1.80			6,694		30		1.82
Long-term debt		47,788		536		4.48			48,114		528		4.39
Total interest-bearing liabilities excluding derivatives		375,782		2,516		2.66			367,828		2,203		2.40
Risk management derivatives (c)		—		141		0.15			—		141		0.16
Total interest-bearing liabilities including derivatives		375,782		2,657		2.81			367,828		2,344		2.56
Noninterest-bearing deposits		62,978							62,171
Other liabilities		25,479							26,248
Stockholders’ equity		47,328							47,114
Total liabilities and stockholders’ equity	$	511,567						$	503,361
Interest income and rate earned — including derivatives			$	6,113		5.64	%			$	5,755		5.46	%
Interest expense and equivalent rate paid — including derivatives				2,657		2.44					2,344		2.23
Net interest income and margin — including derivatives			$	3,456		3.20	%			$	3,411		3.23	%

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

58

FIRST QUARTER 2005							FOURTH QUARTER 2004								THIRD QUARTER 2004
				Average								Average							Average
		Interest		Rates					Interest			Rates					Interest		Rates
Average		Income/		Earned/			Average		Income/			Earned/			Average		Income/		Earned/
Balances		Expense		Paid			Balances		Expense			Paid			Balances		Expense		Paid
$	2,484		16		2.62	%	$	3,909		18			1.85	%	$	3,153		12		1.52	%
	24,272		153		2.55			24,722		123			1.99			26,419		96		1.44
	35,147		402		4.59			36,517		411			4.49			32,052		348		4.34
	114,961		1,477		5.15			103,879		1,297			5.00			101,493		1,237		4.88
	76,651		960		5.08			69,394		836			4.79			58,278		642		4.40
	12,608		156		5.01			10,537		120			4.53			6,683		67		4.02
	20,739		271		5.31			19,035		237			4.95			14,877		170		4.54
	10,513		182		6.94			10,185		180			7.07			9,692		178		7.33
	7,192		58		3.28			7,448		58			3.10			7,330		47		2.51
	127,703		1,627		5.16			116,599		1,431			4.88			96,860		1,104		4.54
	74,658		1,037		5.57			62,083		853			5.49			54,288		732		5.38
	11,003		120		4.41			10,560		107			4.04			10,145		97		3.80
	7,811		122		6.31			7,285		111			6.12			7,259		107		5.86
	93,472		1,279		5.49			79,928		1,071			5.35			71,692		936		5.21
	221,175		2,906		5.30			196,527		2,502			5.08			168,552		2,040		4.83
	12,869		166		5.19			21,405		261			4.89			17,119		186		4.34
	10,139		115		4.58			10,531		104			3.89			11,121		96		3.43
	421,047		5,235		5.00			397,490		4,716			4.74			359,909		4,015		4.45
	—		279		0.27			—		313			0.31			—		349		0.39
	421,047		5,514		5.27			397,490		5,029			5.05			359,909		4,364		4.84
	12,661							11,870								11,159
	66,778							63,071								53,331
$	500,486						$	472,431							$	424,399
											��
	81,071		161		0.81			79,476		128			0.64			73,171		93		0.51
	93,477		357		1.55			90,382		271			1.19			81,525		197		0.96
	36,005		239		2.70			32,540		212			2.58			26,860		180		2.68
	10,996		61		2.26			9,486		46			1.92			7,453		27		1.42
	12,583		83		2.67			9,938		56			2.31			7,803		39		1.98
	234,132		901		1.56			221,822		713			1.28			196,812		536		1.08
	51,395		312		2.46			47,264		233			1.96			47,052		164		1.39
	13,553		82		2.45			11,840		58			1.94			12,065		43		1.42
	12,681		102		3.25			12,694		102			3.18			12,388		96		3.09
	6,370		26		1.63			5,859		19			1.33			6,042		15		0.91
	47,385		493		4.17			44,010		443			4.02			39,951		404		4.05
	365,516		1,916		2.12			343,489		1,568			1.82			314,310		1,258		1.60
	—		124		0.14			—		104			0.12			—		78		0.09
	365,516		2,040		2.26			343,489		1,672			1.94			314,310		1,336		1.69
	60,542							58,229								51,433
	27,197							28,069								25,410
	47,231							42,644								33,246
$	500,486						$	472,431							$	424,399
		$	5,514		5.27	%			$	5,029			5.05	%			$	4,364		4.84	%
			2,040		1.96					1,672			1.68					1,336		1.48
		$	3,474		3.31	%			$	3,357			3.37	%			$	3,028		3.36	%

(c) The rates earned and the rates paid on risk management derivatives are based on off-balance sheet notional amounts. The fair value of these instruments is included in other assets and other liabilities.

59

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	2005										2004
	Third			Second			��	First			Fourth			Third
(In millions, except per share data)	Quarter			Quarter				Quarter			Quarter			Quarter
ASSETS
Cash and due from banks	$	12,976			12,464				12,043			11,714			10,355
Interest-bearing bank balances		2,492			2,852				1,285			4,441			7,664
Federal funds sold and securities purchased under resale agreements (carrying amount of collateral held $14,920 at September 30, 2005, $5,377 repledged)		27,083			22,528				24,899			22,436			30,629
Total cash and cash equivalents		42,551			37,844				38,227			38,591			48,648
Trading account assets		49,646			46,519				47,149			45,932			45,129
Securities		117,195			117,906				116,731			110,597			102,157
Loans, net of unearned income		239,733			230,287				227,266			223,840			174,504
Allowance for loan losses		(2,719	)		(2,718	)			(2,732	)		(2,757	)		(2,324	)
Loans, net		237,014			227,569				224,534			221,083			172,180
Loans held for sale		18,038			14,531				14,173			12,988			17,755
Premises and equipment		5,352			5,354				5,260			5,268			4,150
Due from customers on acceptances		882			826				826			718			563
Goodwill		21,857			21,861				21,635			21,526			11,481
Other intangible assets		1,285			1,378				1,428			1,581			946
Other assets		38,561			38,052				36,870			35,040			33,689
Total assets	$	532,381			511,840				506,833			493,324			436,698
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Noninterest-bearing deposits		68,402			63,079				61,626			64,197			52,524
Interest-bearing deposits		252,037			236,831				236,031			230,856			200,457
Total deposits		320,439			299,910				297,657			295,053			252,981
Short-term borrowings		78,184			75,726				73,401			63,406			67,589
Bank acceptances outstanding		932			859				866			755			570
Trading account liabilities		19,815			19,827				22,418			21,709			22,704
Other liabilities		16,504			15,750				15,281			15,507			14,838
Long-term debt		45,846			49,006				47,932			46,759			41,444
Total liabilities		481,720			461,078				457,555			443,189			400,126
Minority interest in net assets of consolidated subsidiaries		3,904			2,858				2,811			2,818			2,675
STOCKHOLDERS’ EQUITY
Dividend Equalization Preferred shares, no par value, 97 million shares issued and outstanding at September 30, 2005		—			—				—			—			—
Common stock, $3.33-1/3 par value; authorized 3 billion shares, outstanding 1.553 billion shares at September 30, 2005		5,178			5,258				5,255			5,294			4,359
Paid-in capital		30,821			31,038				30,976			31,120			18,095
Retained earnings		11,086			11,079				10,319			10,178			10,449
Accumulated other comprehensive income, net		(328	)		529				(83	)		725			994
Total stockholders’ equity		46,757			47,904				46,467			47,317			33,897
Total liabilities and stockholders’ equity	$	532,381			511,840				506,833			493,324			436,698

60

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	2005							2004
	Third		Second		First			Fourth			Third
(In millions, except per share data)	Quarter		Quarter		Quarter			Quarter			Quarter
INTEREST INCOME
Interest and fees on loans	$	3,588		3,362		3,174			2,814			2,393
Interest and dividends on securities		1,434		1,437		1,426			1,232			1,156
Trading account interest		403		354		378			388			325
Other interest income		635		549		475			535			427
Total interest income		6,060		5,702		5,453			4,969			4,301
INTEREST EXPENSE
Interest on deposits		1,408		1,221		1,050			860			691
Interest on short-term borrowings		742		670		601			492			396
Interest on long-term debt		507		453		389			320			249
Total interest expense		2,657		2,344		2,040			1,672			1,336
Net interest income		3,403		3,358		3,413			3,297			2,965
Provision for credit losses		82		50		36			109			43
Net interest income after provision for credit losses		3,321		3,308		3,377			3,188			2,922
FEE AND OTHER INCOME
Service charges		555		528		513			519			499
Other banking fees		385		355		351			343			313
Commissions		615		603		599			620			568
Fiduciary and asset management fees		732		728		714			700			668
Advisory, underwriting and other investment banking fees		294		257		233			271			237
Trading account profits (losses)		146		17		99			(16	)		(60	)
Principal investing		166		41		59			7			201
Securities gains (losses)		29		136		(2	)		23			(71	)
Other income		320		312		429			337			246
Total fee and other income		3,242		2,977		2,995			2,804			2,601
NONINTEREST EXPENSE
Salaries and employee benefits		2,476		2,324		2,401			2,239			2,118
Occupancy		260		271		250			260			234
Equipment		276		269		265			272			268
Advertising		50		48		44			51			46
Communications and supplies		158		158		162			163			149
Professional and consulting fees		167		155		127			179			134
Other intangible amortization		101		107		115			113			99
Merger-related and restructuring expenses		83		90		61			116			127
Sundry expense		433		366		447			441			496
Total noninterest expense		4,004		3,788		3,872			3,834			3,671
Minority interest in income of consolidated subsidiaries		104		71		64			54			28
Income before income taxes		2,455		2,426		2,436			2,104			1,824
Income taxes		790		776		815			656			561
Net income	$	1,665		1,650		1,621			1,448			1,263
PER COMMON SHARE DATA
Basic earnings	$	1.07		1.05		1.03			0.97			0.97
Diluted earnings		1.06		1.04		1.01			0.95			0.96
Cash dividends	$	0.51		0.46		0.46			0.46			0.40
AVERAGE COMMON SHARES
Basic		1,549		1,564		1,571			1,487			1,296
Diluted		1,575		1,591		1,603			1,518			1,316

61

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets- September 30, 2005 and December 31, 2004 (Unaudited)	63
Consolidated Statements of Income- Three and Nine Months Ended September 30, 2005 and 2004 (Unaudited)	64
Consolidated Statements of Cash Flows- Nine Months Ended September 30, 2005 and 2004 (Unaudited)	65
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies and Other Matters	66
Note 2: Securities	68
Note 3: Comprehensive Income	69
Note 4: Business Segments	70
Note 5: Basic and Diluted Earnings Per Common Share	73
Note 6: Derivatives	73
Note 7: Guarantees	76

62

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS(Unaudited)

	September 30,			December 31,
(In millions, except per share data)	2005			2004
ASSETS
Cash and due from banks	$	12,976			11,714
Interest-bearing bank balances		2,492			4,441
Federal funds sold and securities purchased under resale agreements (carrying amount of collateral held $14,920 at September 30, 2005, $5,377 repledged)		27,083			22,436
Total cash and cash equivalents		42,551			38,591
Trading account assets		49,646			45,932
Securities		117,195			110,597
Loans, net of unearned income		239,733			223,840
Allowance for loan losses		(2,719	)		(2,757	)
Loans, net		237,014			221,083
Loans held for sale		18,038			12,988
Premises and equipment		5,352			5,268
Due from customers on acceptances		882			718
Goodwill		21,857			21,526
Other intangible assets		1,285			1,581
Other assets		38,561			35,040
Total assets	$	532,381			493,324
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Noninterest-bearing deposits		68,402			64,197
Interest-bearing deposits		252,037			230,856
Total deposits		320,439			295,053
Short-term borrowings		78,184			63,406
Bank acceptances outstanding		932			755
Trading account liabilities		19,815			21,709
Other liabilities		16,504			15,507
Long-term debt		45,846			46,759
Total liabilities		481,720			443,189
Minority interest in net assets of consolidated subsidiaries		3,904			2,818
STOCKHOLDERS’ EQUITY
Dividend Equalization Preferred shares, no par value, 97 million shares issued and outstanding at September 30, 2005		—			—
Common stock, $3.33-1/3 par value; authorized 3 billion shares, outstanding 1.553 billion shares at September 30, 2005		5,178			5,294
Paid-in capital		30,821			31,120
Retained earnings		11,086			10,178
Accumulated other comprehensive income, net		(328	)		725
Total stockholders’ equity		46,757			47,317
Total liabilities and stockholders’ equity	$	532,381			493,324

63

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In millions, except per share data)	2005		2004			2005		2004
INTEREST INCOME
Interest and fees on loans	$	3,588		2,393			10,124		7,044
Interest and dividends on securities		1,434		1,156			4,297		3,407
Trading account interest		403		325			1,135		759
Other interest income		635		427			1,659		1,109
Total interest income		6,060		4,301			17,215		12,319
INTEREST EXPENSE
Interest on deposits		1,408		691			3,679		1,993
Interest on short-term borrowings		742		396			2,013		1,011
Interest on long-term debt		507		249			1,349		651
Total interest expense		2,657		1,336			7,041		3,655
Net interest income		3,403		2,965			10,174		8,664
Provision for credit losses		82		43			168		148
Net interest income after provision for credit losses		3,321		2,922			10,006		8,516
FEE AND OTHER INCOME
Service charges		555		499			1,596		1,459
Other banking fees		385		313			1,091		883
Commissions		615		568			1,817		1,981
Fiduciary and asset management fees		732		668			2,174		2,072
Advisory, underwriting and other investment banking fees		294		237			784		640
Trading account profits (losses)		146		(60	)		262		51
Principal investing		166		201			266		254
Securities gains (losses)		29		(71	)		163		(33	)
Other income		320		246			1,061		668
Total fee and other income		3,242		2,601			9,214		7,975
NONINTEREST EXPENSE
Salaries and employee benefits		2,476		2,118			7,201		6,464
Occupancy		260		234			781		687
Equipment		276		268			810		780
Advertising		50		46			142		142
Communications and supplies		158		149			478		457
Professional and consulting fees		167		134			449		369
Other intangible amortization		101		99			323		318
Merger-related and restructuring expenses		83		127			234		328
Sundry expense		433		496			1,246		1,287
Total noninterest expense		4,004		3,671			11,664		10,832
Minority interest in income of consolidated subsidiaries		104		28			239		130
Income before income taxes		2,455		1,824			7,317		5,529
Income taxes		790		561			2,381		1,763
Net income	$	1,665		1,263			4,936		3,766
PER COMMON SHARE DATA
Basic earnings	$	1.07		0.97			3.16		2.90
Diluted earnings		1.06		0.96			3.10		2.85
Cash dividends	$	0.51		0.40			1.43		1.20
AVERAGE COMMON SHARES
Basic		1,549		1,296			1,561		1,299
Diluted		1,575		1,316			1,590		1,321

64

WACHOVIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

	Nine Months Ended
	September 30,
(In millions)	2005			2004
OPERATING ACTIVITIES
Net income	$	4,936			3,766
Adjustments to reconcile net income to net cash provided (used) by operating activities
Accretion and amortization of securities discounts and premiums, net		187			151
Provision for credit losses		168			148
Securitization transactions		(148	)		(47	)
Gain on sale of mortgage servicing rights		(20	)		(30	)
Securities transactions		(163	)		33
Depreciation and other amortization		1,087			1,051
Trading account assets, net		(3,714	)		(10,415	)
Mortgage loans held for resale		101			(126	)
Loss on sales of premises and equipment		90			101
Contribution to qualified pension plan		(330	)		(253	)
Loans held for sale, net		(5,814	)		(5,321	)
Other assets, net		(647	)		680
Trading account liabilities, net		(1,894	)		3,520
Other liabilities, net		1,969			(2,184	)
Net cash used by operating activities		(4,192	)		(8,926	)
INVESTING ACTIVITIES
Increase (decrease) in cash realized from
Sales of securities		41,173			34,719
Maturities of securities		28,560			22,315
Purchases of securities		(77,858	)		(58,873	)
Origination of loans, net		(15,452	)		(8,989	)
Sales of premises and equipment		50			476
Purchases of premises and equipment		(865	)		(615	)
Goodwill and other intangible assets		(331	)		(353	)
Purchase of bank-owned separate account life insurance		(1,705	)		(195	)
Cash equivalents acquired, net of purchases of insurance organizations		18			—
Net cash used by investing activities		(26,410	)		(11,515	)
FINANCING ACTIVITIES
Increase (decrease) in cash realized from
Increase in deposits, net		25,386			31,756
Securities sold under repurchase agreements and other short-term borrowings, net		14,778			(3,701	)
Issuances of long-term debt		6,599			7,941
Payments of long-term debt		(7,512	)		(3,227	)
Issuances of common stock, net		207			402
Purchases of common stock		(2,651	)		(1,023	)
Cash dividends paid		(2,245	)		(1,571	)
Net cash provided by financing activities		34,562			30,577
Decrease in cash and cash equivalents		3,960			10,136
Cash and cash equivalents, beginning of year		38,591			38,512
Cash and cash equivalents, end of period	$	42,551			48,648
NONCASH ITEMS
Transfer to securities from loans	$	51			245
Transfer to securities from loans held for sale		87			—
Transfer to loans held for sale from loans, net	$	(576	)		(317	)

65

WACHOVIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS

GENERAL

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

     The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, the unaudited condensed consolidated financial statements do not include all the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The unaudited condensed consolidated financial statements of the Company include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of such financial statements for all periods presented. The financial position and result of operations as of and for the three and nine months ended September 30, 2005, are not necessarily indicative of the results of operations that may be expected in the future. Please refer to the Company’s 2004 Annual Report on Form 10-K for additional information related to the Company’s audited consolidated financial statements for the three years ended December 31, 2004, including the related notes to consolidated financial statements.

BUSINESS COMBINATIONS

     On September 12, 2005, the Company announced the signing of a definitive merger agreement with Westcorp and WFS Financial Inc (“WFS”) the common stock of which 84 percent is owned by Westcorp and 16 percent is held by the public. The acquisition of this California-based auto loan originator business is expected to be completed in the first quarter of 2006. The terms of this transaction call for the Company to exchange 1.2749 shares of its common stock for each share of Westcorp common stock and 1.4661 shares of its common stock for each share of WFS common stock. Based on the Company’s average of the closing prices for a period beginning two trading days before the announcement of the merger and ending two days after the merger announcement of $49.76, the transaction is valued at $3.9 billion.

     On June 21, 2004, the Company announced the signing of a definitive merger agreement with SouthTrust Corporation (“SouthTrust”), and the merger was completed on November 1, 2004. The terms of this transaction called for the Company to exchange 0.89 shares of its common stock for each share of SouthTrust common stock. Based on the Company’s average of the closing prices for a period beginning two trading days before the announcement of the merger and ending two days after the merger announcement of $45.86, the transaction is valued at $14.0 billion and represents an exchange value of $40.82 for each share of SouthTrust common stock.

STOCK-BASED COMPENSATION

     In 2002, the Company adopted the fair value method of accounting for stock options. Certain awards made prior to January 1, 2002, continued to be accounted for using the intrinsic value method through their required service period which ended in 2004.

     The effect on net income available to common stockholders and earnings per share as if the fair value method had been applied to all outstanding and unvested awards for the three and nine months ended September 30, 2005 and 2004, is presented below.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions, except per share data)	2005			2004			2005			2004
Net income available to common stockholders, as reported	$	1,665			1,263			4,936			3,766
Add stock-based employee compensation expense included in reported net income, net of income taxes		14			22			50			62
Deduct total stock-based employee compensation expense determined under the fair value method for all awards, net of income taxes		(14	)		(25	)		(50	)		(95	)
Pro forma net income available to common stockholders	$	1,665			1,260			4,936			3,733
PER COMMON SHARE DATA
Basic — as reported	$	1.07			0.97			3.16			2.90
Basic — pro forma		1.07			0.97			3.16			2.87
Diluted — as reported		1.06			0.96			3.10			2.85
Diluted — pro forma	$	1.06			0.96			3.10			2.83

66

PERSONNEL EXPENSE AND RETIREMENT BENEFITS

     The components of the retirement benefit costs included in salaries and employee benefits for the nine months ended September 30, 2005 and 2004, are presented below.

											Other Postretirement
	Qualified Pension						Nonqualified Pension				Benefits
	Nine Months Ended						Nine Months Ended				Nine Months Ended
	September 30,						September 30,				September 30,
(In millions)	2005			2004			2005		2004		2005			2004
RETIREMENT BENEFIT COSTS
Service cost	$	134			115			3		1		3			3
Interest cost		182			174			19		16		38			39
Expected return on plan assets		(312	)		(285	)		—		—		(2	)		(2	)
Amortization of prior service cost		(20	)		(20	)		—		—		(6	)		(6	)
Amortization of actuarial losses		66			60			7		6		5			6
Termination benefit cost		—			—			—		—		1			—
Net retirement benefit costs	$	50			44			29		23		39			40

     In April 2005, the Company contributed $330 million to the Qualified Pension. The Company does not expect to make any additional contributions to the Qualified Pension during the year. Additionally, the Company’s practice is to contribute annually to each of the Nonqualified Pension and Other Postretirement Benefits an amount equal to the benefit payments made during the year less any retiree contributions received during the year.

RECLASSIFICATIONS

     Certain amounts in 2004 were reclassified to conform with the presentation in 2005. These reclassifications had no effect on the Company’s previously reported consolidated financial position or results of operations.

67

NOTE 2: SECURITIES

	September 30, 2005
																		Average
	1 Year			1-5		5-10		After 10				Gross Unrealized				Amortized		Maturity
(In millions)	or Less			Years		Years		Years		Total		Gains		Losses		Cost		in Years
MARKET VALUE
U.S. Treasury	$	805			11		140		41		997		3		1		995		2.39
Mortgage-backed securities, principally obligations of U.S. Government agencies and sponsored entities		158			26,363		46,931		8		73,460		107		854		74,207		5.59
Asset-backed
Residual interests from securitizations		59			653		76		—		788		217		1		572		3.23
Retained bonds from securitizations		276			2,577		157		3		3,013		36		3		2,980		3.23
Collateralized mortgage obligations		102			6,031		689		—		6,822		12		58		6,868		3.66
Commercial mortgage-backed		5			3,196		4,146		—		7,347		250		39		7,136		5.72
Other		4,240			330		101		—		4,671		7		3		4,667		0.88
State, county and municipal		26			595		567		2,245		3,433		223		2		3,212		15.28
Sundry		1,218			7,028		4,094		4,324		16,664		270		43		16,437		7.02
Total market value	$	6,889			46,784		56,901		6,621		117,195		1,125		1,004		117,074		5.64
MARKET VALUE
Debt securities	$	6,889			46,784		56,901		4,308		114,882		1,077		992		114,797
Equity securities		—			—		—		2,313		2,313		48		12		2,277
Total market value	$	6,889			46,784		56,901		6,621		117,195		1,125		1,004		117,074
AMORTIZED COST
Debt securities	$	6,862			46,403		57,352		4,180		114,797
Equity securities		—			—		—		2,277		2,277
Total amortized cost	$	6,862			46,403		57,352		6,457		117,074
WEIGHTED AVERAGE YIELD
U.S. Treasury		3.52	%		3.42		2.60		4.95		3.45
Mortgage-backed securities, principally obligations of U.S. Government agencies and sponsored entities		6.34			4.76		5.03		5.01		4.94
Asset-backed
Residual interests from securitizations		22.86			16.22		28.16		—		17.73
Retained bonds from securitizations		6.04			4.60		7.90		8.93		4.90
Collateralized mortgage obligations		6.43			4.91		5.02		—		4.94
Commercial mortgage-backed		3.81			6.94		5.04		—		5.84
Other		4.37			5.30		5.22		—		4.45
State, county and municipal		7.35			8.77		8.55		6.99		7.55
Sundry		4.28			4.12		4.34		5.77		4.62
Consolidated		4.53	%		4.99		5.04		6.17		5.05

68

��

     At September 30, 2005, all securities were classified as available for sale.

     At September 30, 2005, mortgage-backed securities included Federal National Mortgage Association and Federal Home Loan Mortgage Corporation securities with an amortized cost of $54.4 billion and a market value of $53.8 billion, and an amortized cost of $17.3 billion and a market value of $17.2 billion, respectively. Also included in mortgage-backed securities are U.S. Government agency and Government-sponsored entity securities retained from the securitization of residential mortgage loans. These securities had an amortized cost and market value of $1.5 billion at September 30, 2005.

     Included in asset-backed securities are retained bonds primarily from the securitization of commercial and consumer real estate, SBA and auto loans. At September 30, 2005, retained bonds with an amortized cost and a market value of $2.9 billion were considered investment grade based on external ratings. Retained bonds with an amortized cost and market value of $2.3 billion at September 30, 2005, had an external credit rating of AA and above.

     Securities with an aggregate amortized cost of $59.5 billion at September 30, 2005, 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, 2005, there were forward commitments to purchase securities on both a regular way and non-regular way basis at a cost that approximates a market value of $6.8 billion. At September 30, 2005, there were commitments to sell securities at a cost that approximates a market value of $3.2 billion.

     Gross gains and losses realized on the sale of debt securities in the nine months ended September 30, 2005, were $429 million and $281 million (including $117 million of impairment losses), respectively, and gross gains and losses realized on the sale of equity securities were $17 million and $2 million (including $2 million of impairment losses), respectively.

NOTE 3: COMPREHENSIVE INCOME

     Comprehensive income is defined as the change in equity from all transactions other than those with stockholders, and it includes net income and other comprehensive income. Comprehensive income for the three and nine months ended September 30, 2005 and 2004, is presented below.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions)	2005			2004			2005			2004
COMPREHENSIVE INCOME
Net income	$	1,665			1,263			4,936			3,766
OTHER COMPREHENSIVE INCOME
Net unrealized holding gain (loss) on securities		(848	)		744			(1,027	)		(113	)
Net unrealized loss on cash flow hedge derivatives		(9	)		(221	)		(26	)		(232	)
Total comprehensive income	$	808			1,786			3,883			3,421

69

NOTE 4: BUSINESS SEGMENTS (a)

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

     Business segment earnings are the primary measure of segment profit or loss that the Company uses to assess segment performance and to allocate resources. Economic profit, risk-adjusted return on capital (“RAROC”) and efficiency ratios are additional metrics, all of which are based on and calculated directly from segment earnings, that assist management in evaluating segment results. Please refer to the Company’s 2004 Annual Report, including pages 26 through 32 and pages 104 through 106, for additional information related to business segments and performance metrics.

     The Company continuously updates segment information for changes that occur in the management of the Company’s businesses. Additionally, in the first quarter of 2005, the Company transferred certain insurance business lines to Wealth Management from Capital Management and have updated information for 2004 to reflect this change. The impact of this and other changes to previously reported segment earnings for full year 2004 was a $7 million decrease in the General Bank, a $5 million decrease in Capital Management, a $7 million increase in Wealth Management, a $42 million decrease in the Corporate and Investment Bank, and a $47 million increase in the Parent.

	Three Months Ended September 30, 2005
															Net Merger-
									Corporate						Related
									and						and
	General			Capital			Wealth		Investment						Restructuring
(Dollars in millions)	Bank			Management			Management		Bank			Parent			Expenses (c)			Total
CONSOLIDATED
Net interest income (b)	$	2,434			171			147		549			155			(53	)		3,403
Fee and other income		760			1,201			191		1,011			79			—			3,242
Intersegment revenue		56			(12	)		1		(45	)		—			—			—
Total revenue (b)		3,250			1,360			339		1,515			234			(53	)		6,645
Provision for credit losses		77			—			6		(3	)		2			—			82
Noninterest expense		1,584			1,111			235		809			182			83			4,004
Minority interest		—			—			—		—			105			(1	)		104
Income taxes (benefits)		573			92			35		242			(121	)		(31	)		790
Tax-equivalent adjustment		10			1			—		21			21			(53	)		—
Net income	$	1,006			156			63		446			45			(51	)		1,665
Economic profit	$	775			117			48		263			34			—			1,237
Risk adjusted return on capital		54.85	%		44.22			47.41		29.63			16.06			—			39.73
Economic capital, average	$	7,019			1,399			528		5,603			2,529			—			17,078
Cash overhead efficiency ratio (b)		48.74	%		81.86			68.99		53.39			35.05			—			57.06
Lending commitments	$	105,598			184			5,574		93,938			433			—			205,727
Average loans, net		163,801			694			14,180		38,783			11,502			—			228,960
Average core deposits	$	208,718			30,700			13,224		24,797			3,309			—			280,748
FTE employees		41,609			18,340			4,660		4,799			23,499			—			92,907

70

	Three Months Ended September 30, 2004
																Net Merger-
										Corporate						Related
										and						and
	General			Capital			Wealth			Investment						Restructuring
(Dollars in millions)	Bank			Management			Management			Bank			Parent			Expenses (c)			Total
CONSOLIDATED
Net interest income (b)	$	1,985			155			129			587			172			(63	)		2,965
Fee and other income		601			1,124			143			786			(53	)		—			2,601
Intersegment revenue		43			(13	)		2			(33	)		1			—			—
Total revenue (b)		2,629			1,266			274			1,340			120			(63	)		5,566
Provision for credit losses		74			—			(1	)		(15	)		(15	)		—			43
Noninterest expense		1,362			1,094			191			682			215			127			3,671
Minority interest		—			—			—			—			65			(37	)		28
Income taxes (benefits)		423			62			31			217			(137	)		(35	)		561
Tax-equivalent adjustment		10			—			—			30			23			(63	)		—
Net income (loss)	$	760			110			53			426			(31	)		(55	)		1,263
Economic profit	$	592			74			36			269			(50	)		—			921
Risk adjusted return on capital		57.00	%		33.27			42.66			34.19			2.55			—			37.69
Economic capital, average	$	5,123			1,312			447			4,603			2,253			—			13,738
Cash overhead efficiency ratio (b)		51.80	%		86.39			69.93			50.86			96.32	��		—			61.20
Lending commitments	$	76,592			107			4,390			75,732			319			—			157,140
Average loans, net		124,687			643			11,204			32,854			(836	)		—			168,552
Average core deposits	$	170,188			29,547			12,171			18,597			2,486			—			232,989
FTE employees		34,519			19,699			3,671			4,548			22,066			—			84,503

	Nine Months Ended September 30, 2005
															Net Merger-
									Corporate						Related
									and						and
	General			Capital			Wealth		Investment						Restructuring
(Dollars in millions)	Bank			Management			Management		Bank			Parent			Expenses (c)			Total
CONSOLIDATED
Net interest income (b)	$	7,203			486			430		1,661			561			(167	)		10,174
Fee and other income		2,131			3,578			520		2,779			206			—			9,214
Intersegment revenue		148			(36	)		4		(118	)		2			—			—
Total revenue (b)		9,482			4,028			954		4,322			769			(167	)		19,388
Provision for credit losses		202			—			5		(14	)		(25	)		—			168
Noninterest expense		4,643			3,293			645		2,253			596			234			11,664
Minority interest		—			—			—		—			264			(25	)		239
Income taxes (benefits)		1,672			270			111		698			(291	)		(79	)		2,381
Tax-equivalent adjustment		30			1			—		76			60			(167	)		—
Net income	$	2,935			464			193		1,309			165			(130	)		4,936
Economic profit	$	2,229			349			144		782			126			—			3,630
Risk adjusted return on capital		53.46	%		44.32			49.20		30.36			17.89			—			39.92
Economic capital, average	$	7,021			1,401			504		5,402			2,462			—			16,790
Cash overhead efficiency ratio (b)		48.97	%		81.78			67.54		52.12			35.51			—			56.80
Lending commitments	$	105,598			184			5,574		93,938			433			—			205,727
Average loans, net		161,685			675			13,546		37,832			10,963			—			224,701
Average core deposits	$	205,460			31,194			13,227		22,749			3,132			—			275,762
FTE employees		41,609			18,340			4,660		4,799			23,499			—			92,907

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	Nine Months Ended September 30, 2004
																Net Merger-
										Corporate						Related
										and						and
	General			Capital			Wealth			Investment						Restructuring
(Dollars in millions)	Bank			Management			Management			Bank			Parent			Expenses (c)			Total
CONSOLIDATED
Net interest income (b)	$	5,728			410			359			1,772			585			(190	)		8,664
Fee and other income		1,772			3,703			441			2,241			(182	)		—			7,975
Intersegment revenue		121			(37	)		4			(90	)		2			—			—
Total revenue (b)		7,621			4,076			804			3,923			405			(190	)		16,639
Provision for credit losses		207			—			(1	)		(45	)		(13	)		—			148
Noninterest expense		3,990			3,456			571			1,920			567			328			10,832
Minority interest		—			—			—			—			214			(84	)		130
Income taxes (benefits)		1,212			225			85			660			(325	)		(94	)		1,763
Tax-equivalent adjustment		31			—			—			93			66			(190	)		—
Net income (loss)	$	2,181			395			149			1,295			(104	)		(150	)		3,766
Economic profit	$	1,655			282			98			820			(126	)		—			2,729
Risk adjusted return on capital		53.63	%		38.28			39.98			35.10			3.62			—			37.39
Economic capital, average	$	5,187			1,379			449			4,543			2,256			—			13,814
Cash overhead efficiency ratio (b)		52.35	%		84.78			71.06			48.93			61.86			—			60.53
Lending commitments	$	76,592			107			4,390			75,732			319			—			157,140
Average loans, net		121,696			508			10,671			30,579			355			—			163,809
Average core deposits	$	165,798			24,558			11,697			17,506			2,305			—			221,864
FTE employees		34,519			19,699			3,671			4,548			22,066			—			84,503

(a)	Certain amounts presented in periods prior to the third quarter of 2005 have been reclassified to conform to the presentation in the third quarter of 2005.
(b)	Tax-equivalent.
(c)	Tax-equivalent amounts are eliminated herein in order for “Total” amounts to agree with amounts appearing in the Consolidated Statements of Income.

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NOTE 5: BASIC AND DILUTED EARNINGS PER COMMON SHARE

     The calculation of basic and diluted earnings per common share for the three and nine months ended September 30, 2005 and 2004, is presented below.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions, except per share data)	2005		2004		2005		2004
Income available to common stockholders	$	1,665		1,263		4,936		3,766
Basic earnings per common share		1.07		0.97		3.16		2.90
Diluted earnings per common share	$	1.06		0.96		3.10		2.85
Average common shares — basic		1,549		1,296		1,561		1,299
Common share equivalents, unvested restricted stock and incremental common shares from forward purchase contracts		26		20		29		22
Average common shares — diluted		1,575		1,316		1,590		1,321

NOTE 6: DERIVATIVES (a)

     Risk management derivative financial instruments at September 30, 2005, are presented below.

	September 30, 2005
											In-			Average
	Notional		Gross Unrealized								effective-			Maturity in
(In millions)	Amount		Gains		Losses (f)			Equity (g)			ness (h)			Years (i)
ASSET HEDGES
Cash flow hedges (b)
Interest rate swaps—receive fixed	$	42,496		687		(330	)		219			1			4.46
Interest rate swaps—pay fixed		1,337		—		(90	)		(56	)		—			4.75
Forward purchase commitments		2,304		—		(9	)		(5	)		—			0.05
Futures		400		—		(1	)		—			—			0.25
Fair value hedges (c)
Interest rate swaps—pay fixed		2,120		34		(3	)		—			(2	)		16.24
Forward sale commitments		2,511		10		(5	)		—			(4	)		0.06
Total asset hedges	$	51,168		731		(438	)		158			(5	)		4.51
LIABILITY HEDGES
Cash flow hedges (d)
Interest rate swaps—pay fixed	$	42,928		221		(360	)		(87	)		—			4.06
Futures		42,250		66		—			41			—			0.25
Fair value hedges (e)
Interest rate swaps—receive fixed		19,707		364		(212	)		—			(1	)		6.72
Interest rate options		1,125		—		—			—			—			0.01
Total liability hedges	$	106,010		651		(572	)		(46	)		(1	)		2.99
Total	$	157,178		1,382		(1,010	)		112			(6	)		—

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

(b) Receive-fixed interest rate swaps with a notional amount of $42.5 billion 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 $1.3 billion and with receive rates based on one-month LIBOR are designated as cash flow hedges of available for sale securities. Forward purchase commitments of $1.0 billion and $1.3 billion are designated as cash flow hedges of the variability of the consideration to be paid on the forecasted purchase of loans and available for sale securities, respectively. Eurodollar futures with a notional amount of $400 million are designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of one-month LIBOR-indexed loans.

(c) Pay-fixed interest rate swaps with a notional amount of $2.1 billion and receive rates based on LIBOR are designated as fair value hedges of available for sale securities. Forward sale commitments of $1.7 billion and $761 million are designated as fair value hedges of available for sale securities and mortgage loans in the warehouse, respectively.

(d) Derivatives with a notional amount of $74.4 billion are designated as cash flow hedges of the variability in cash flows attributable to the forecasted issuance of fixed rate short-term liabilities that are part of a rollover strategy. Of this amount, $32.1 billion are pay-fixed interest rate swaps with receive rates based on one-to-three month LIBOR, of which $9.0 billion are forward-starting, and $42.3 billion are Eurodollar futures. Pay-fixed interest rate swaps with a notional amount of $10.8 billion, of which $2.2 billion are forward-starting and with rates based on one-to-six month LIBOR, are designated as cash flow hedges of the variability in cash flows related to the forecasted interest rate resets of long-term debt.

(e) Receive-fixed interest rate swaps with a notional amount of $19.7 billion and with pay rates based primarily on one-to-six month LIBOR are designated as fair value hedges of fixed rate liabilities, primarily long-term debt. Purchased interest rate options with a notional amount of $1.1 billion are designated as fair value hedges of embedded interest rate options in long-term debt.

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

(g) At September 30, 2005, the net unrealized loss on derivatives included in accumulated other comprehensive income, which is a component of stockholders’ equity, was $349 million, net of income taxes. Of this net of tax amount, a $112 million gain represents the effective portion of the net gains (losses) on derivatives that qualify as cash flow hedges, and a $461 million loss relates to terminated and/or redesignated derivatives. At September 30, 2005, $21 million of net losses, 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 28.89 years.

(h) In the nine months ended September 30, 2005, losses in the amount of $6 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, 2005, was increased by $5 million representing ineffectiveness of cash flow hedges caused by differences between the critical terms of the derivative and the hedged item, primarily differences in reset dates.

(i) Estimated maturity approximates average life.

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     Expected maturities of risk management derivative financial instruments at September 30, 2005, are presented below.

	September 30, 2005
	1 Year			1-2			2-5			5-10			After 10
(In millions)	or Less			Years			Years			Years			Years			Total
CASH FLOW ASSET HEDGES
Notional amount — swaps—receive fixed	$	5,984			955			17,612			17,945			—			42,496
Notional amount — swaps—pay fixed		—			45			579			675			38			1,337
Notional amount — other	$	2,704			—			—			—			—			2,704
Weighted average receive rate (a)		3.81	%		4.07			4.58			5.16			2.47			4.71
Weighted average pay rate (a)		3.89	%		3.70			3.77			3.86			4.58			3.82
Unrealized gain (loss)	$	(39	)		(14	)		(18	)		330			(2	)		257
FAIR VALUE ASSET HEDGES
Notional amount — swaps—pay fixed	$	—			41			70			388			1,621			2,120
Notional amount — other	$	2,511			—			—			—			—			2,511
Weighted average receive rate (a)		—	%		3.67			3.79			3.69			2.58			2.72
Weighted average pay rate (a)		—	%		3.24			4.09			4.45			3.82			3.93
Unrealized gain (loss)	$	4			1			1			6			24			36
CASH FLOW LIABILITY HEDGES
Notional amount — swaps—pay fixed	$	3,987			12,017			12,897			10,552			3,475			42,928
Notional amount — other	$	30,600			9,425			2,225			—			—			42,250
Weighted average receive rate (a)		3.91	%		3.89			3.91			3.85			3.76			3.89
Weighted average pay rate (a)		2.66	%		3.99			5.35			6.42			5.89			4.62
Unrealized gain (loss)	$	51			54			54			(44	)		(188	)		(73	)
FAIR VALUE LIABILITY HEDGES
Notional amount — swaps—receive fixed	$	500			3,865			7,552			5,472			2,318			19,707
Notional amount — other	$	1,125			—			—			—			—			1,125
Weighted average receive rate (a)		7.28	%		5.81			4.83			4.70			5.45			5.12
Weighted average pay rate (a)		4.07	%		3.89			3.82			3.98			3.70			3.87
Unrealized gain (loss)	$	9			1			86			(29	)		85			152

(a) Weighted average receive and pay rates include the impact of currently effective interest rate swaps only and not the impact of forward-starting interest rate swaps. All the interest rate swaps have variable pay or receive rates based on one-to-six month LIBOR, and they are the pay or receive rates in effect at September 30, 2005.

     Activity related to risk management derivative financial instruments for the nine months ended September 30, 2005, is presented below.

	September 30, 2005
	Asset			Liability
(In millions)	Hedges			Hedges			Total
Balance, December 31, 2004	$	57,438			166,238			223,676
Additions		87,743			83,723			171,466
Maturities and amortizations		(36,861	)		(66,852	)		(103,713	)
Terminations		(25,686	)		(4,115	)		(29,801	)
Redesignations and transfers to trading account assets		(31,466	)		(72,984	)		(104,450	)
Balance, September 30, 2005	$	51,168			106,010			157,178

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NOTE 7: GUARANTEES

	September 30, 2005				December 31, 2004
			Maximum				Maximum
	Carrying		Risk of		Carrying		Risk of
(In millions)	Amount		Loss		Amount		Loss
Securities and other lending indemnifications	$	—		63,834		—		48,879
Standby letters of credit		106		33,757		101		30,815
Liquidity agreements		2		7,099		1		7,568
Loans sold with recourse		43		4,901		39		5,238
Residual value guarantees on operating leases		12		682		9		629
Written put options		185		3,860		353		3,187
Contingent consideration		—		280		—		259
Total guarantees	$	348		114,413		503		96,575

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