Exhibit 99
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WACHOVIA CORPORATION AND SUBSIDIARIES
RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES
EXPLANATION OF OUR USE OF NON-GAAP FINANCIAL MEASURES
In addition to the results of operations presented in accordance with generally accepted accounting principles (GAAP), our management uses, and this exhibit contains, certain non-GAAP financial measures, such as net income excluding merger-related and restructuring expenses, and goodwill and other intangible amortization; net income available to common stockholders excluding merger-related and restructuring expenses, and goodwill and other intangible amortization; returns on average assets excluding merger-related and restructuring expenses, and goodwill and other intangible amortization; returns on average stockholders’ equity excluding merger-related and restructuring expenses, and goodwill and other intangible amortization; overhead efficiency ratios, including net interest income on a tax-equivalent basis, and excluding merger-related and restructuring expenses, and goodwill and other intangible amortization; operating leverage amounts excluding merger-related and restructuring expenses, and goodwill and other intangible amortization; and dividend payout ratios on common shares excluding merger-related and restructuring expenses, and goodwill and other intangible amortization. We believe these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance, our business and performance trends, and facilitate comparisons with the performance of others in the financial services industry.
Specifically, we believe that 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. Those 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.
In addition, because of the significant amount of primarily deposit base intangible amortization, we believe that the exclusion of amortization 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 merger-related and restructuring expenses, and goodwill and other intangible amortization (cash earnings), and has communicated certain cash dividend payout ratio goals to investors. We believe that the cash 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. We also believe that 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 that 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 follows.
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WACHOVIA CORPORATION AND SUBSIDIARIES
RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES
2002 | 2001 | |||||||||||||||||
| (Dollars in millions, except per share data) | * | Fourth Quarter | Third Quarter | Second Quarter | First Quarter | Fourth Quarter | ||||||||||||
NET INCOME | ||||||||||||||||||
Net income(GAAP) | A | $ | 895 | 916 | 855 | 913 | 736 | |||||||||||
After tax merger-related and restructuring expenses(GAAP) | 92 | 67 | 89 | (5 | ) | 63 | ||||||||||||
Net income, excluding merger-related and | B | 987 | 983 | 944 | 908 | 799 | ||||||||||||
After tax goodwill and other intangible amortization(GAAP) | 83 | 98 | 103 | 108 | 181 | |||||||||||||
Net income, excluding after tax merger-related and restructuring expenses, goodwill and other intangible amortization(Cash basis) | C | $ | 1,070 | 1,081 | 1,047 | 1,016 | 980 | |||||||||||
NET INCOME AVAILABLE TO COMMON | ||||||||||||||||||
Net income available to common stockholders(GAAP) | D | $ | 891 | 913 | 849 | 907 | 730 | |||||||||||
After tax merger-related and restructuring expenses(GAAP) | 92 | 67 | 89 | (5 | ) | 63 | ||||||||||||
Net income available to common stockholders, | E | 983 | 980 | 938 | 902 | 793 | ||||||||||||
After tax goodwill and other intangible amortization(GAAP) | 83 | 98 | 103 | 108 | 181 | |||||||||||||
Net income available to common stockholders, | F | $ | 1,066 | 1,078 | 1,041 | 1,010 | 974 | |||||||||||
RETURN ON AVERAGE ASSETS | ||||||||||||||||||
Average assets(GAAP) | G | $ | 329,960 | 321,511 | 314,714 | 315,322 | 319,221 | |||||||||||
Average intangible assets(GAAP) | (12,478 | ) | (12,510 | ) | (12,650 | ) | (12,676 | ) | (12,817 | ) | ||||||||
Average tangible assets(GAAP) | H | $ | 317,482 | 309,001 | 302,064 | 302,646 | 306,404 | |||||||||||
Return on average assets | A/G | 1.08 | % | 1.13 | 1.09 | 1.17 | 0.91 | |||||||||||
Excluding merger-related and restructuring expenses | B/G | 1.19 | 1.21 | 1.20 | 1.17 | 0.99 | ||||||||||||
Return on average tangible assets | ||||||||||||||||||
GAAP | A/H | 1.12 | 1.18 | 1.14 | 1.22 | 0.95 | ||||||||||||
Cash basis | C/H | 1.34 | % | 1.39 | 1.39 | 1.36 | 1.27 | |||||||||||
RETURN ON AVERAGE COMMON | ||||||||||||||||||
Average common stockholders' equity(GAAP) | I | $ | 31,944 | 31,098 | 29,565 | 28,887 | 28,528 | |||||||||||
Merger-related and restructuring expenses(GAAP) | 190 | 123 | 25 | (21 | ) | 692 | ||||||||||||
Average common stockholders' equity, excluding | J | 32,134 | 31,221 | 29,590 | 28,866 | 29,220 | ||||||||||||
Average intangible assets(GAAP) | K | (12,478 | ) | (12,510 | ) | (12,650 | ) | (12,676 | ) | (12,817 | ) | |||||||
Average common stockholders' equity(Cash basis) | L | $ | 19,656 | 18,711 | 16,940 | 16,190 | 16,403 | |||||||||||
Return on average common stockholders' equity | ||||||||||||||||||
GAAP | D/I | 11.07 | % | 11.63 | 11.52 | 12.74 | 10.15 | |||||||||||
Excluding merger-related and restructuring expenses | E/J | 12.13 | 12.44 | 12.72 | 12.68 | 10.77 | ||||||||||||
Return on average tangible common stockholders' equity | ||||||||||||||||||
GAAP | D/I+K | 18.16 | 19.49 | 20.13 | 22.69 | 18.43 | ||||||||||||
Cash basis | F/L | 21.52 | % | 22.84 | 24.66 | 25.30 | 23.56 | |||||||||||
PAGE 3 OF 3
WACHOVIA CORPORATION AND SUBSIDIARIES
RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES
| 2002 | 2001 | |||||||||||||||||
| (Dollars in millions, except per share data) | * | Fourth Quarter | Third Quarter | Second Quarter | First Quarter | Fourth Quarter | ||||||||||||
| OVERHEAD EFFICIENCY RATIOS | ||||||||||||||||||
Noninterest expense(GAAP) | M | $ | 3,042 | 2,945 | 2,926 | 2,769 | 3,030 | |||||||||||
Merger-related and restructuring expenses(GAAP) | (145 | ) | (107 | ) | (143 | ) | 8 | (88 | ) | |||||||||
Noninterest expense, excluding merger-related and restructuring expenses | N | 2,897 | 2,838 | 2,783 | 2,777 | 2,942 | ||||||||||||
Goodwill and other intangible amortization(GAAP) | (147 | ) | (152 | ) | (161 | ) | (168 | ) | (251 | ) | ||||||||
Noninterest expense(Cash basis) | O | $ | 2,750 | 2,686 | 2,622 | 2,609 | 2,691 | |||||||||||
Net interest income(GAAP) | $ | 2,470 | 2,466 | 2,461 | 2,426 | 2,432 | ||||||||||||
Tax-equivalent adjustment | 59 | 54 | 54 | 51 | 52 | |||||||||||||
Net interest income(Tax-equivalent) | P | $ | 2,529 | 2,520 | 2,515 | 2,477 | 2,484 | |||||||||||
Fee and other income(GAAP) | Q | $ | 1,978 | 1,890 | 2,110 | 2,027 | 2,060 | |||||||||||
Overhead efficiency ratios | ||||||||||||||||||
GAAP | M/P+Q | 67.51 | % | 66.77 | 63.28 | 61.48 | 66.68 | |||||||||||
Excluding merger-related and restructuring expenses | N/P+Q | 64.30 | 64.33 | 60.19 | 61.66 | 64.74 | ||||||||||||
Cash basis | O/P+Q | 61.04 | % | 60.87 | 56.72 | 57.93 | 59.22 | |||||||||||
| OPERATING LEVERAGE | ||||||||||||||||||
Operating leverage(GAAP) | $ | (2 | ) | (232 | ) | (38 | ) | 221 | 903 | |||||||||
After tax merger-related and restructuring expenses(GAAP) | 38 | (35 | ) | 151 | (96 | ) | (1 | ) | ||||||||||
Operating leverage, excluding merger-related and restructuring expenses | 36 | (267 | ) | 113 | 125 | 902 | ||||||||||||
After tax goodwill and other intangible amortization(GAAP) | 6 | 8 | 8 | 83 | (134 | ) | ||||||||||||
Operating leverage(Cash basis) | $ | 30 | (275 | ) | 105 | 42 | 1,036 | |||||||||||
| DIVIDEND PAYOUT RATIOS ON COMMON SHARES | ||||||||||||||||||
Dividends paid per common share | R | $ | 0.26 | 0.26 | 0.24 | 0.24 | 0.24 | |||||||||||
Diluted earnings per common share(GAAP) | S | $ | 0.66 | 0.66 | 0.62 | 0.66 | 0.54 | |||||||||||
Merger-related and restructuring expenses(GAAP) | 0.06 | 0.05 | 0.06 | – | 0.04 | |||||||||||||
Goodwill and other intangible amortization(GAAP) | 0.06 | 0.07 | 0.08 | 0.08 | 0.13 | |||||||||||||
Diluted earnings per common share(Cash basis) | T | $ | 0.78 | 0.78 | 0.76 | 0.74 | 0.71 | |||||||||||
Dividend payout ratios | ||||||||||||||||||
GAAP | R/S | 39.39 | % | 39.39 | 38.71 | 36.36 | 44.44 | |||||||||||
Cash basis | R/T | 33.33 | % | 33.33 | 31.58 | 32.43 | 33.80 | |||||||||||
* The letters included in the column are provided to show how the various ratios presented in this table are calculated. For example, return on average assets on a GAAP basis is calculated by dividing net income (GAAP) by average assets (GAAP) (i.e., A/G).
