Exhibit 99(c)
Highlights of First Quarter 2002 Quarterly Earnings Report
[LOGO]
Conference Call Wachovia
April 18, 2002
ALL INFORMATION EXCLUDES MERGER-RELATED, RESTRUCTURING AND OTHER CHARGES/GAINS
EXCEPT WHERE SPECIFICALLY NOTED.
Certain tables in this Quarterly Earnings Report display "Combined" results for
the third quarter of 2001. "Combined" results for the third quarter of 2001
represent Wachovia's actual 2001 third quarter results plus the actual results
of Former Wachovia for July and August 2001. The "Combined" results are for
illustrative purposes only and presentation of 3Q01 results on this "Combined"
basis is not a presentation that conforms with generally accepted accounting
principles. The 3Q01 "Combined" results include purchase accounting and other
closing adjustments as of the actual closing date of 9/1/01; no attempt was made
to show the "Combined" results "as if" the merger had occurred at 7/1/01.
Readers are encouraged to refer to Wachovia's results for the year ended
12/31/01 presented in accordance with generally accepted accounting principles
which may be found in Wachovia's 2001 annual report on Form 10-K. Tabular
financial information presented herein, unless specifically labeled "Combined,"
represents operating earnings information. All narrative comparisons are with
fourth quarter 2001 unless otherwise noted.
[LOGO]
First Quarter 2002 - Financial Highlights Wachovia
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Versus 4Q01
- -----------
. Cash operating earnings of $0.74 per share, up 4%
. Revenue down 1%; up 1% excluding principal investing losses
- General Bank results solid in a seasonally weak quarter with continued
momentum
. Revenue down slightly vs. strong 4Q01 due to lower mortgage-related volume
. Low-cost core deposits up 6%; core deposits up 2%
. Customer service scores continue to improve, up for the 12/th/ consecutive
quarter
- Corporate and Investment Bank revenue up 5% excluding principal investing,
driven by strength in fixed income
- Capital Management and Wealth Management results stable
. Continued strong expense control: cash expenses down 3%; FTEs declined by
1,237 including 275 associated with divested branches
. Cash operating efficiency ratio of 57.9% improved 129 bps
. Total NPAs grew 6% from 4Q01, largely due to a large retail credit and
weakness in telecom
. Tier 1 capital ratio increased a strong 47 bps to 7.51%
. Merger integration continues to progress well; incremental expense
efficiencies of $88 million achieved during the quarter
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[LOGO]
Summary Operating Results Wachovia
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Earnings Summary 2002 2001
-------- ----------
First Fourth
Quarter Quarter
EPS EPS
- ------------------------------------------------------------------------------------------------------------
Cash operating earnings $ 0.74 0.71
Deposit base and other intangible amortization (0.08) (0.09)
Goodwill amortization (related to former First Union) - (0.04)
- ------------------------------------------------------------------------------------------------------------
Operating earnings 0.66 0.58
Total merger-related and restructuring charges - (0.04)
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Net earnings (GAAP) $ 0.66 0.54
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KEY POINTS
. Branch sale gain of $121 million largely offset by merger-related charges
. Estimated 2002 quarterly after-tax intangibles amortization: Q2: $101 million
($0.07/share), Q3: $97 million ($0.07/share), Q4: $96 million ($0.07/share)
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Summary Operating Results Wachovia
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================================================================
In accordance with purchase accounting, results are not restated
================================================================
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Operating Earnings Summary 2002 2001 1 Q 02 Combined
----------- ------------------------------------- -----------
First Fourth Third Second First vs Third
(In millions, except per share data) Quarter Quarter Quarter Quarter Quarter 4 Q 01 Quarter
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Net interest income (Tax-equivalent) $ 2,477 2,484 1,974 1,742 1,734 - % $ 2,347
Fee and other income 2,027 2,060 1,036 1,629 1,546 (2) 1,294
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Total revenue (Tax-equivalent) 4,504 4,544 3,010 3,371 3,280 (1) 3,641
Provision for loan losses 339 381 244 223 219 (11)
Noninterest expense, excluding goodwill
and other intangible amortization 2,609 2,691 2,193 2,092 2,060 (3) $ 2,657
Goodwill and other intangible amortization 168 251 117 77 78 (33)
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Income before income taxes (Tax-equivalent) 1,388 1,221 456 979 923 14
Income taxes (Tax-equivalent) 480 422 158 330 313 14
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Net income $ 908 799 298 649 610 14 %
Net income (Cash basis) $ 1,016 980 395 723 684 4 %
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Diluted earnings per common share $ 0.66 0.58 0.27 0.66 0.62 14 %
Diluted earnings per common share (Cash basis) $ 0.74 0.71 0.36 0.73 0.69 4 %
Return on average common stockholders' equity 12.68 % 10.77 5.77 16.19 15.64 -
Return on average tangible common
stockholders' equity (Cash basis) 25.30 % 23.56 11.36 23.35 22.91 - %
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Key Points
. Cash expenses down 3% due primarily to additional merger efficiencies
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Key Financial Measures Wachovia
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Performance Highlights 2002 2001 1 Q 02
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First Fourth Third Second First vs
(In millions, except per share data) Quarter Quarter Quarter Quarter Quarter 4 Q 01
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Cash operating earnings
Net income $ 1,016 980 395 723 684 4 %
Diluted earnings per common share $ 0.74 0.71 0.36 0.73 0.69 4
Dividend payout ratio on common shares 32.43 % 33.80 66.67 32.88 34.78 -
Return on average tangible assets 1.36 1.27 0.60 1.19 1.15 -
Return on average tangible common
stockholders' equity 25.30 23.56 11.36 23.35 22.91 -
Overhead efficiency ratio 57.93 % 59.22 72.86 62.06 62.80 -
Operating leverage $ 42 1,036 (462) 59 (67) (96) %
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Other financial data
Net interest margin 3.90 % 3.81 3.58 3.41 3.42 -
Average diluted common shares 1,366 1,363 1,105 978 976 - %
Actual common shares 1,368 1,362 1,361 979 981 -
Dividends paid per common share $ 0.24 0.24 0.24 0.24 0.24 -
Book value per common share $ 21.04 20.88 20.94 16.49 16.39 1 %
Tax rate (Tax-equivalent)/(a)/ 34.58 % 34.56 34.65 33.71 33.91 -
Tier 1 capital ratio/(b)/ 7.51 7.04 6.75 7.37 7.18 -
Total capital ratio/(b)/ 11.60 11.08 10.84 11.45 11.33 -
Leverage ratio/(b)/ 6.50 % 6.19 7.22 6.00 5.88 -
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Other
FTE employees 82,809 84,046 85,534 67,420 69,362 (1) %
Total financial centers 2,795 2,846 2,853 2,162 2,164 (2)
Total ATMs 4,618 4,675 4,698 3,419 3,676 (1) %
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/(a)/ The tax-equivalent tax rate applies to fully tax-equivalized revenues.
/(b)/ The first quarter of 2002 is based on estimates.
=============================================================================================================================
KEY POINTS
. Cash operating efficiency ratio of 57.9% continues to show strong
improvement, down 129 bps
. Net interest margin increase of 9 bps due to the effects of reduction in
low spread assets, growth in equity, low-cost core deposits, and a low rate
environment
. Tax rate of 34.6% remained stable versus 4Q01
. Tier 1 capital ratio improved a strong 47 bps to 7.51%, as a result of
retained earnings and risk reduction strategies
. FTEs declined by 1,237, including 275 associated with the completion of the
divestiture of 37 branches
4
[LOGO]
Loan and Deposit Growth Wachovia
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Average Balance Sheet Data 2002 2001 1 Q 02 Combined
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First Fourth Third Second First vs Third
(In millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01 Quarter
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Commercial loans $ 99,489 102,230 83,633 76,378 77,270 (3)% $ 105,903
Consumer loans 57,575 60,609 49,393 42,834 42,580 (5) 61,617
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Total loans 157,064 162,839 133,026 119,212 119,850 (4)% 167,520
==================================================================================================================== ===============
Core interest-bearing deposits 126,087 124,784 102,285 91,654 91,149 1 % 123,454
Noninterest-bearing deposits 37,603 37,042 29,918 27,381 27,043 2 35,530
- -------------------------------------------------------------------------------------------------------------------- ---------------
Total core deposits 163,690 161,826 132,203 119,035 118,192 1 158,984
Foreign and other time deposits 14,313 17,646 18,015 17,944 19,090 (19) 20,620
- -------------------------------------------------------------------------------------------------------------------- ---------------
Total deposits $ 178,003 179,472 150,218 136,979 137,282 (1)% $ 179,604
==================================================================================================================== ===============
Memoranda
Low-cost core deposits $ 112,510 107,799 84,030 72,615 70,256 4 %
Other core deposits 51,180 54,027 48,173 46,420 47,936 (5)
- -------------------------------------------------------------------------------------------------------------------- ---------------
Total core deposits $ 163,690 161,826 132,203 119,035 118,192 1 % $ 158,984
==================================================================================================================== ===============
Key Points
. Commercial loans $2.7 billion or 3% lower due to portfolio management
actions and weak commercial loan demand
. Consumer loans $3.0 billion lower due to effects of sales, securitizations
and transfers ($4.0 billion from 4Q01 and $0.7 billion from 1Q02 events);
excluding these, average consumer loan growth would have been $1.7 billion
or 3%
. Low-cost core deposits up 4% corporate-wide (up 5% excluding divestitures);
total core deposits increased 1% (up 2% excluding divestitures) in a
seasonally weak quarter
5
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Fee and Other Income Wachovia
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Fee and Other Income 2002 2001 1 Q 02 Combined
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First Fourth Third Second First vs Third
(In millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01 Quarter
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Service charges and fees $ 661 672 541 486 468 (2) % $ 658
Commissions 464 448 356 389 375 4 396
Fiduciary and asset management fees 477 478 400 384 381 - 460
Advisory, underwriting and other
investment banking fees 240 223 177 238 198 8 192
Principal investing (90) (21) (585) (58) (43) - (587)
Other income 275 260 147 190 167 6 175
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Total fee and other income $ 2,027 2,060 1,036 1,629 1,546 (2) % $1,294
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Key Points
. Fee and other income declined 2% due to higher principal investing losses;
excluding the losses, fees increased 2%
. Service charges and fees declined primarily due to lower mortgage volume
. Advisory, underwriting and other investment banking fees up on improved
fixed income performance despite relatively weak markets
. Principal investing losses higher than anticipated due largely to a $43
million mark-to-market loss related to a single publicly traded security
- Market value of remaining public portfolio $53 million
. Other Income: Securitization income down $10 million from 4Q01; net gains
on securities and assets held for sale totaled $15 million
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Noninterest Expense Wachovia
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Noninterest Expense 2002 2001 1 Q 02 Combined
------------ ------------------------------------- ------------
First Fourth Third Second First vs Third
(In millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01 Quarter
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Salaries and employee benefits $ 1,663 1,663 1,374 1,363 1,329 - % $ 1,661
Occupancy 195 210 176 155 163 (7) 211
Equipment 226 247 214 198 205 (9) 258
Advertising 19 21 15 11 9 (10) 23
Communications and supplies 134 142 117 111 110 (6) 144
Professional and consulting fees 88 113 79 69 73 (22) 115
Sundry expense 284 295 218 185 171 (4) 245
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Noninterest expense, excluding goodwill
and other intangible amortization 2,609 2,691 2,193 2,092 2,060 (3) $ 2,657
Goodwill and other intangible amortization 168 251 117 77 78 (33)
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Total noninterest expense $ 2,777 2,942 2,310 2,169 2,138 (6)%
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Key Points
. Total cash expenses excluding intangibles amortization declined 3% vs. 4Q01,
due to cost control and merger efficiencies
. Expenses were down in all other categories
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Consolidated Results - Operating Summary Wachovia
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Wachovia Corporation Three Months Ended March 31, 2002
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Performance Summary General Capital Wealth Corporate and
(In millions) Bank Management Management Investment Bank Parent Consolidated
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Income statement data
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Net interest income (Tax-equivalent) $ 1,649 45 96 597 90 2,477
Fee and other income 498 778 140 498 113 2,027
Intersegment revenue 40 (17) 1 (18) (6) -
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Total revenue (Tax-equivalent) 2,187 806 237 1,077 197 4,504
Provision for loan losses 115 - 1 222 1 339
Noninterest expense 1,205 676 168 521 207 2,777
Income taxes (Tax-equivalent) 317 48 25 124 (34) 480
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Operating earnings $ 550 82 43 210 23 908
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Performance and other data
- --------------------------
Economic profit $ 392 64 31 67 53 607
Risk adjusted return on capital (RAROC) 40.07 % 49.95 49.02 14.37 19.29 25.41
Economic capital, average $ 5,473 669 330 8,028 2,588 17,088
Cash overhead efficiency ratio 55.12 % 83.91 70.82 48.57 19.86 57.93
Average loans, net $ 98,030 169 8,400 43,342 7,123 157,064
Average core deposits $ 136,096 1,423 9,771 12,766 3,634 163,690
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Key Points
. General Bank contributed over 60% of consolidated operating earnings, versus
70% in 4Q01
. All businesses again exceeded their cost of capital
8
General Bank - Operating Summary [LOGO]
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General Bank 2002 2001 1 Q 02 Combined
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Performance Summary First Fourth Third Second First vs Third
(In millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01 Quarter
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Income statement data
- ---------------------
Net interest income (Tax-equivalent) $ 1,649 1,642 1,270 1,133 1,079 - % $ 1,540
Fee and other income 498 578 434 378 333 (14) 531
Intersegment revenue 40 45 29 27 25 (11) 45
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Total revenue (Tax-equivalent) 2,187 2,265 1,733 1,538 1,437 (3) 2,116
Provision for loan losses 115 130 97 98 100 (12)
Noninterest expense 1,205 1,239 1,011 922 891 (3) $ 1,239
Income taxes (Tax-equivalent) 317 327 219 176 155 (3)
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Operating earnings $ 550 569 406 342 291 (3) %
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Performance and other data
- --------------------------
Economic profit $ 392 412 280 255 220 (5) %
Risk adjusted return on capital (RAROC) 40.07 % 42.56 36.95 39.86 37.44 -
Economic capital, average $ 5,473 5,356 4,446 3,675 3,507 2
Cash overhead efficiency ratio 55.12 % 54.70 57.80 59.00 61.02 -
Average loans, net $ 98,030 97,004 76,383 65,240 63,107 1 $ 95,796
Average core deposits $ 136,096 133,996 109,656 98,429 97,421 2 % $ 132,092
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Key Points
. Revenue declined 3% from a very strong 4Q01; revenues flat excluding the
effect of lower mortgage-related results
. Expenses decreased 3% due to lower salaries and continued tight expense
control
. Solid loan growth of 1% with continued strength in consumer real estate
secured products and student lending
. Low-cost core deposits up a strong 6% and core deposits grew 2%
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General Bank - Key Operating Measures Wachovia
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General Bank Key Metrics 2002 2001 1 Q02
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First Fourth Third Second First vs
Quarter Quarter Quarter Quarter Quarter 4 Q01
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Customer overall satisfaction score /(a)/ 6.37 6.35 6.33 6.32 6.29 - %
Online customers (Enrollments in thousands) 4,429 4,123 3,810 2,903 2,640 7
Financial centers 2,795 2,846 2,853 2,162 2,164 (2)
ATMs 4,618 4,675 4,698 3,419 3,676 (1)%
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/(a)/ Gallup survey measured on a 1-7 scale; 6.4 = "best in class". 2001 scores represents customers of the former First Union
only.
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Key Points
. Overall customer satisfaction scores increased for the 12/th/ consecutive
quarter to 6.37; interviewed 80,000 customers for the quarter
. Beginning 1Q02, this score reflects customer satisfaction levels of both
First Union and Wachovia financial centers
10
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Capital Management - Operating Summary Wachovia
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Capital Management 2002 2001 1 Q 02 Combined
Performance Summary -------- ---------------------------------------------- -----------
First Fourth Third Second First vs Third
(In millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01 Quarter
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Income statement data
- ---------------------
Net interest income (Tax-equivalent) $ 45 47 32 31 33 (4) % $ 45
Fee and other income 778 782 652 687 678 (1) 714
Intersegment revenue (17) (19) (12) (12) (11) (11) (19)
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Total revenue (Tax-equivalent) 806 810 672 706 700 - 740
Provision for loan losses - - - - - -
Noninterest expense 676 670 573 583 574 1 $ 639
Income taxes (Tax-equivalent) 48 51 34 42 44 (6)
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Operating earnings $ 82 89 65 81 82 (8) %
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Performance and other data
- --------------------------
Economic profit $ 64 68 41 59 59 (6) %
Risk adjusted return on capital (RAROC) 49.95 % 53.14 32.22 42.79 42.91 -
Economic capital, average $ 669 661 801 768 772 1
Cash overhead efficiency ratio 83.91 % 82.77 85.24 82.42 82.12 -
Average loans, net $ 169 337 269 110 129 (50) $ 283
Average core deposits $ 1,423 1,505 1,535 1,609 1,827 (5) % $1,556
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Key Points
. Total revenue remained stable at $806 million versus $810 million in 4Q01
reflecting the benefits of the balanced distribution model
- 60 trading days in 1Q02 vs. 64 trading days in 4Q01
. Positive fluctuating fund and money market fund flows and continued strong
annuity sales helped offset lower asset valuations
. Expenses up modestly, with direct expenses down due to focus on expense
controls
11
[LOGO]
Capital Management - Key Operating Measures Wachovia
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Capital Management Key Metrics 2002 2001 1 Q 02
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First Fourth Third Second First vs
(In millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01
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Separate account assets $ 124,168 122,439 124,592 81,879 81,576 1 %
Mutual fund assets 106,036 104,031 101,749 90,279 86,767 2
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Total assets under management/(a)/ $ 230,204 226,470 226,341 172,158 168,343 2
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Gross fluctuating mutual fund sales $ 3,383 2,755 2,238 1,981 1,983 23
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Assets under care (Excluding AUM)/(b)/ $ 575,821 564,293 539,751 541,847 537,404 2
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Registered representatives (Actual) 8,100 7,972 8,145 7,652 7,736 2
Broker client assets $ 274,600 274,300 257,900 240,600 232,900 -
Margin loans $ 3,206 3,244 3,192 3,060 3,060 (1)
Brokerage offices (Actual) 3,362 3,434 3,461 2,690 2,695 (2) %
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/(a)/ Includes $76 billion in assets managed for Wealth Management which are
also reported in that segment.
/(b)/ Includes $25 billion in assets held for Wealth Management which are also
reported in that segment.
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Key Points
. Total AUM rose to $230 billion driven by net sales in mutual funds and
separate accounts
. Mutual fund assets grew to $106 billion, over half of the increase due to
higher net fluctuating fund sales
12
[LOGO]
Wealth Management - Operating Summary Wachovia
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Wealth Management 2002 2001 1 Q 02 Combined
--------- -------------------------------------- ---------
Performance Summary First Fourth Third Second First vs Third
(In millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01 Quarter
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Income statement data
- ---------------------
Net interest income (Tax-equivalent) $ 96 93 61 48 46 3 % $ 85
Fee and other income 140 136 100 79 79 3 135
Intersegment revenue 1 1 - - - - 1
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Total revenue (Tax-equivalent) 237 230 161 127 125 3 221
Provision for loan losses 1 4 2 - - (75)
Noninterest expense 168 160 114 85 84 5 $ 169
Income taxes (Tax-equivalent) 25 24 16 13 15 4
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Operating earnings $ 43 42 29 29 26 2 %
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Performance and other data
- --------------------------
Economic profit $ 31 32 20 22 20 (3)%
Risk adjusted return on capital (RAROC) 49.02 % 50.96 46.24 62.73 62.09 -
Economic capital, average $ 330 318 237 171 165 4
Cash overhead efficiency ratio 70.82 % 69.44 71.00 65.81 67.07 -
Average loans, net $ 8,400 8,148 5,680 4,449 4,368 3 $7,994
Average core deposits $ 9,771 9,431 7,313 6,367 6,176 4 % $9,240
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Wealth Management Key Metrics/(a)/ 2002 2001 1 Q 02
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First Fourth Third Second First vs
(Dollars in millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01
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Assets under management/(b)/ $ 75,700 77,700 78,100 48,100 47,900 (3)%
PCM/ PFA client relationships (Actual) 79,300 79,250 79,250 52,500 52,450 -
Wealth Management advisors (Actual) 984 983 983 552 558 - %
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/(a)/ 3Q01 and 4Q01 restated to reflect subsequent consolidations of client accounts of both legacy companies, as
well as transfers of relationships and assets to other business units. Future restatements may occur as
relationships are moved to channels that best meet client needs.
/(b)/ These assets are managed by and reported in Capital Management.
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Key Points
. Revenue growth of 3% driven by strong private banking results, insurance
commissions
. Strong loan and deposit growth driven by additional teams and
refined business model
13
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Corporate and Investment Bank - Operating Summary Wachovia
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Corporate and Investment Bank 2002 2001 1 Q 02 Combined
----------- --------------------------------------------------------- --------
Performance Summary First Fourth Third Second First vs Third
(In millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01 Quarter
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Income statement data
---------------------
Net interest income (Tax-equivalent) $ 597 693 506 479 450 (14)% $ 599
Fee and other income 498 419 (218) 374 354 19 (163)
Intersegment revenue (18) (19) (16) (15) (12) (5) (19)
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Total revenue (Tax-equivalent) 1,077 1,093 272 838 792 (1) 417
Provision for loan losses 222 254 126 93 70 (13)
Noninterest expense 521 551 483 503 475 (5) $ 553
Income taxes (Tax-equivalent) 124 107 (129) 82 85 16
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Operating earnings $ 210 181 (208) 160 162 16 %
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Performance and other data
--------------------------
Economic profit $ 67 34 (358) 6 (3) 97 %
Risk adjusted return on capital (RAROC) 14.37 % 13.60 (10.46) 12.36 11.82 -
Economic capital, average $ 8,028 8,262 6,311 6,040 6,235 (3)
Cash overhead efficiency ratio 48.57 % 50.54 n/ m 59.84 59.79 -
Average loans, net $ 43,342 46,235 42,070 41,145 42,751 (6) $ 48,378
Average core deposits $ 12,766 12,633 10,490 10,200 9,456 1 % $ 12,009
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Key Points
. Excluding principal investing, revenue grew 5% in poor market conditions
driven by strong fixed income results
. Expenses declined by 5% reflecting merger efficiencies, mainly due to
headcount reduction
. Focus on improving relationship RAROCs and continued weak demand from large
borrowers caused average loans to decline 6%
14
[LOGO]
Asset Quality Wachovia
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Asset Quality 2002 2001 1 Q 02
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First Fourth Third Second First vs
(In millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01
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Nonperforming assets
Nonaccrual loans $ 1,685 1,534 1,506 1,223 1,231 10 %
Foreclosed properties 159 179 126 104 106 (11)
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Total nonperforming assets $ 1,844 1,713 1,632 1,327 1,337 8 %
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as % of loans, net and foreclosed properties 1.14 % 1.04 0.96 1.08 1.09 -
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Nonperforming loans in loans held for sale $ 213 228 273 250 344 (7) %
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Total nonperforming assets in loans
and in loans held for sale $ 2,057 1,941 1,905 1,577 1,681 6 %
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as % of loans, net, foreclosed properties and
loans in other assets as held for sale 1.21 % 1.13 1.08 1.23 1.30 -
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Allowance for loan losses
Balance, beginning of period $ 2,995 3,039 1,760 1,759 1,722 (1) %
Former Wachovia balance, September 1, 2001 - - 766 - - -
Loan losses, net (325) (378) (243) (157) (159) (14)
Allowance relating to loans transferred or sold (23) (47) (368) (65) (23) (51)
Provision for loan losses related to loans
transferred or sold 14 3 230 36 15 -
Provision for loan losses 325 378 894 187 204 (14)
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Balance, end of period $ 2,986 2,995 3,039 1,760 1,759 - %
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as % of loans, net 1.84 % 1.83 1.79 1.44 1.43 -
as % of nonaccrual and restructured loans/(a)/ 177 195 202 144 143 -
as % of nonperforming assets/(a)/ 162 % 175 186 133 132 -
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Loan losses, net $ 325 378 243 157 159 (14) %
Commercial, as % of average commercial loans 0.97 % 1.19 0.85 0.55 0.56 -
Consumer, as % of average consumer loans 0.59 0.48 0.53 0.48 0.48 -
Total, as % of average loans, net 0.83 % 0.93 0.73 0.52 0.53 -
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Past due loans, 90 days and over
Commercial, as a % of loans, net 1.49 % 1.38 1.30 1.41 1.31 -
Consumer, as a % of loans, net 0.69 % 0.62 0.68 0.73 0.93 -
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/(a)/ These ratios do not include nonperforming loans included in other assets as held for sale.
- --------------------------------------------------------------------------------------------------------------------
Key Points
. Total NPAs rose 6% primarily due to telecom and a large retail credit;
excluding the retail credit, total NPAs were up 2%
. Net loan losses improved by 14%, to $325 million or 0.83% of average net
loans
. Loan losses taken on secured exposure to entities related to an energy
services company totaled $57 million
. Over one-third of commercial losses for the quarter related to telecom
companies
. Allowance totaled $3.0 billion, or 1.84% of loans and 177% of nonperforming
loans
. Provision exceeded charge-offs by $14 million due to the sale or transfer
to loans held for sale of $131 million of commercial loans
15
[LOGO]
Nonperforming Loans Wachovia
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Nonperforming Loans/(a)/ 2002 2001 1 Q 02
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First Fourth Third Second First vs
(In millions) Quarter Quarter Quarter Quarter Quarter 4 Q 01
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Balance, beginning of period $ 1,534 1,506 1,223 1,231 1,176 2 %
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Commercial nonaccrual loan activity
Commercial nonaccrual loans, beginning of period 1,381 1,316 1,088 1,026 939 5
Former Wachovia balance, September 1, 2001 - - 209 - - -
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New nonaccrual loans and advances 541 668 376 361 314 (19)
Charge-offs (277) (335) (193) (125) (125) (17)
Transfers (to) from loans held for sale - - (20) - - -
Transfers (to) from other real estate owned - (40) (5) - - -
Sales (64) (64) (36) (50) - -
Other, principally payments (82) (164) (103) (124) (102) (50)
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Net commercial nonaccrual loan activity 118 65 19 62 87 82
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Commercial nonaccrual loans, end of period 1,499 1,381 1,316 1,088 1,026 9
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Consumer nonaccrual loan activity
Consumer nonaccrual loans, beginning of period 153 190 135 205 237 (19)
Former Wachovia balance, September 1, 2001 - - 33 - - -
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Transfers (to) from loans held for sale - (22) (53) (123) (90) -
Sales and securitizations (17) (91) - - - (81)
Other, net 50 76 75 53 58 (34)
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Net consumer nonaccrual loan activity 33 (37) 22 (70) (32) -
- ----------------------------------------------------------------------------------------------------------------------------
Consumer nonaccrual loans, end of period 186 153 190 135 205 22
- ----------------------------------------------------------------------------------------------------------------------------
Balance, end of period $ 1,685 1,534 1,506 1,223 1,231 10 %
- ----------------------------------------------------------------------------------------------------------------------------
/(a)/ Excludes nonperforming loans included in loans held for sale, which in the first quarter of 2002 and in the fourth,
third, second and first quarters of 2001 were $213 million, $228 million, $273 million, $250 million and $344 million,
respectively.
- ----------------------------------------------------------------------------------------------------------------------------
Key Points
. New commercial nonaccruals related largely to a single large retailer and
telecom outstandings; excluding these, new nonaccruals totaled $259 million
. Sold $81 million of nonperforming loans out of the loan portfolio; $64
million commercial and $17 million consumer
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Loans Held for Sale Wachovia
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- -----------------------------------------------------------------------------------------------------------------------------------
Loans Held for Sale /(a)/ 2002 2001
----------- ------------------------------------------------
First Fourth Third Second First
(In millions) Quarter Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, beginning of period $ 7,763 6,837 5,963 6,790 8,146
Former Wachovia balance as of September 1, 2001 /(b)/ - - 297 - -
Originations/ Purchases 5,866 7,471 4,955 5,279 4,773
Performing loans transferred to (from) loans held for sale, net 46 (43) 1,351 (189) 192
Nonperforming loans transferred to (from) loans held
for sale, net - 35 79 128 90
Allowance for loan losses related to
loans transferred to loans held for sale /(c)/ (4) (10) (262) (40) (23)
Lower of cost or market valuation adjustments (14) (58) (15) (35) (80)
Performing loans sold (6,179) (5,845) (5,177) (5,535) (5,910)
Nonperforming loans sold (22) (106) (88) (130) (45)
Other, net /(d)/ (325) (518) (266) (305) (353)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of period /(e)/ $ 7,131 7,763 6,837 5,963 6,790
- -----------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/(a)/ All activity excludes other real estate owned.
/(b)/ Beginning balance and transfers of former Wachovia loans to loans held for
sale are shown net of $82 million in allowance for loan losses on these
loans and $102 million in purchase accounting adjustments in the third
quarter of 2001.
/(c)/ Excludes $82 million of allowance associated with former Wachovia loans
and $24 million of allowance and provision associated with loans sold
directly out of the loan portfolio in the third quarter of 2001.
/(d)/ Other, net represents primarily loan payments.
/(e)/ Nonperforming loans included in loans held for sale in the first quarter
of 2002 and in the fourth quarter of 2001 were $213 million and $228
million, respectively. Former First Union nonperforming loans included in
loans held for sale in the third, second and first quarters of 2001 were
$195 million, $250 million and $344 million, respectively. The former
Wachovia balance as of September 30, 2001, included nonperforming loans of
$78 million.
- --------------------------------------------------------------------------------
Key Points
. Continued progress on 3Q01 transfer of $1.5 billion ($1.1 billion net) of
higher risk and overlapping loans; remaining loans have a net carrying
value of $268 million after 1Q02 reductions of $424 million
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Merger Update Wachovia
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Merger Integration Metrics
1Q Incremental Total as a Run Rate as
2002 2001 Efficiencies Total % of Goal Goal Run Rate /(b)/ a % of Goal
- ------------------------------------------------------------------------------------------------------------------------------------
Annual expense efficiencies /(a)/ $ 150 86 88 150 17 % $ 890 600 67 %
(In millions)
One-time charges (In millions) $ 75 319 394 26 $ 1,525/(c)/
Position reductions/(d)/ 1,209 1,905 3,114 44 7,000
Branch consolidations - - - - % 250-300
- ------------------------------------------------------------------------------------------------------------------------------------
Target Goal
---------------------------------------
2002 2003 2004
Customer satisfaction scores (TBD 2 Q 02)
New/ Lost ratio /(e)/ (TBD 2 Q 02)
- ------------------------------------------------------------------------------------------------------------------------------------
/(a)/ Expense efficiencies calculated from annualized combined 4Q00 base (excluding commissions, incentives, amortization and
restructuring or merger costs).
/(b)/ Most recent quarter annualized. During 2002 additional merger efficiencies will be realized and additional merger costs
incurred. Expected cumulative net merger expense efficiencies of $490 million in 2002.
/(c)/ Includes $75 million of unanticipated costs associated with hostile takeover attempt.
/(d)/ Represents change in FTE position from pro forma combined December 31, 2000, base of 85,885 and excludes divested businesses
and the impact of strategic repositioning. 2001 total includes 452 of pre-close position reductions.
/(e)/ New core customers gained divided by core customers lost. Core customers exclude single-service credit card, mortgage and
trust customers and out of footprint customers.
- ------------------------------------------------------------------------------------------------------------------------------------
KEY POINTS
1Q02 Achievements
- -----------------
. Incremental expense savings of $88 million achieved over 4Q01 - total of
$150 million for the quarter
. Additional expenses associated with achieving future efficiencies expected
over the balance of 2002; remain comfortable with target of $490 million for
2002
. One-time charges of $75 million represent $249 million of charges partially
offset by a $174 million gain from sale of 37 branches
. 70-75% of employee selections finalized
. 31% of major system-related activities completed including
- Human resources, payroll and benefits
- Accounts payable, fixed assets and purchasing
. Began single customer service satisfaction survey across the entire branch
system
2Q02 Activities
- ---------------
. Legacy banks' legal entities merged April 1
. 400,000 hours of product and system training to financial center personnel
scheduled
. Integrated system testing begins
. Brokerage and mortgage banking conversions and additional investment banking
conversions
. Customer satisfaction and New/ Lost ratio goals to be established
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Summary Wachovia
- --------------------------------------------------------------------------------
1Q02-Wachovia on Track
- ----------------------
. General Bank momentum continues
. Corporate and Investment Bank focused on risk reduction and capital
optimization in a difficult market
. Capital Management and Wealth Management results stable in flat market
. Focus on improving efficiencies evident
. Increase in NPAs in line with expectations, driven by telecommunications
. Improved Tier 1 capital ratio 47 bps
. Merger integration on track and progressing well
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Remainder 2002 Outlook Wachovia
- --------------------------------------------------------------------------------
2002 Outlook-Largely Unchanged From 4Q01
- ----------------------------------------
. Revenues expected to grow in low-mid single digit range, including
---------
anticipation of additional Principal Investing losses over the remainder of
---------------------------------------------------------------------------
the year
--------
. Expenses estimated to remain flat, unless markets rebound
. Average loans expected to grow in the low single digit range from 4Q01
. Margins projected to be relatively stable from 1Q02 for balance of the year
----------------------------
. Continued upward pressure on NPAs
. Full year charge-offs of 60-80 bps
. Tier 1 capital should improve to 7.8% - 8.0% by year end
. Continue to target dividend payout ratio of 30 - 35% of cash earnings
. No material change in average diluted shares
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[LOGO]
Cautionary Statement Wachovia
- --------------------------------------------------------------------------------
The foregoing earnings materials and management's discussion of them
during the teleconference and live audio web cast in connection with Wachovia
Corporation's ("Wachovia") review of first quarter 2002 results may contain,
among other things, certain forward-looking statements with respect to Wachovia,
as well as the goals, plans, objectives, intentions, expectations, financial
condition, results of operations, future performance and business of Wachovia,
including, without limitation, (i) statements relating to certain of Wachovia's
goals and expectations with respect to earnings, earnings per share, revenue,
expenses, and the growth rate in such items, as well as other measures of
economic performance, including statements relating to estimates of credit
quality trends, and (ii) statements preceded by, followed by or that include the
words "may", "could", "would", "should", "believes", "expects", "anticipates",
"estimates", "intends", "plans", "targets", "probably", "potentially",
"projects", "outlook" or similar expressions. These forward-looking statements
involve certain risks and uncertainties that are subject to change based on
various factors (many of which are beyond Wachovia's control). The following
factors, among others, could cause Wachovia's financial performance to differ
materially from the goals, plans, objectives, intentions and expectations
expressed in such forward-looking statements: (1) the risk that the businesses
of former First Union Corporation and former Wachovia Corporation in connection
with their merger (the "Merger") will not be integrated successfully or such
integration may be more difficult, time-consuming or costly than expected; (2)
expected revenue synergies and cost savings from the Merger may not be fully
realized or realized within the expected time frame; (3) revenues following the
Merger may be lower than expected; (4) deposit attrition, operating costs,
customer loss and business disruption following the Merger, including, without
limitation, difficulties in maintaining relationships with employees, may be
greater than expected; (5) the strength of the United States economy in general
and the strength of the local economies in which Wachovia conducts operations
may be different than expected resulting in, among other things, a deterioration
in credit quality or a reduced demand for credit, including the resultant effect
on Wachovia's loan portfolio and allowance for loan losses; (6) the effects of,
and changes in, trade, monetary and fiscal policies and laws, including interest
rate policies of the Board of Governors of the Federal Reserve System; (7)
inflation, interest rate, market and monetary fluctuations; (8) adverse
conditions in the stock market, the public debt market and other capital markets
(including changes in interest rate conditions) and the impact of such
conditions on Wachovia's capital markets and capital management activities,
including, without limitation, its mergers and acquisition advisory business,
equity and debt underwriting activities, private equity investment activities,
derivative securities activities, investment and wealth management advisory
businesses, and brokerage activities; (9) adverse changes in the financial
performance and/or condition of Wachovia's borrowers which could impact the
repayment of such borrowers' outstanding loans; and (10) the impact on
Wachovia's businesses, as well as on the risks set forth above, of various
domestic or international military or terrorist activities or conflicts.
Additional information with respect to factors that may cause actual results to
differ materially from those contemplated by such forward-looking statements is
included in the reports filed by Wachovia with the Securities and Exchange
Commission, including its Current Report on Form 8-K dated April 18, 2002.
Wachovia cautions that the foregoing list of factors is not exclusive.
All subsequent written and oral forward-looking statements concerning the Merger
or other matters and attributable to Wachovia or any person acting on its behalf
are expressly qualified in their entirety by the cautionary statements above.
Wachovia does not undertake any obligation to update any forward-looking
statement, whether written or oral.
21