Press Releases

• Cash operating earnings of 73 cents per share; operating earnings of 66 cents, exceeding market expectations.
• Outstanding results in the General Bank, with revenue up 9 percent and operating earnings up 28 percent from second quarter 2000.
• Core deposits grew 4 percent, excluding divested businesses.
• Operating expense decreased 8 percent from second quarter 2000.
• Net charge-offs of 0.52 percent declined 17 basis points from second quarter 2000.
• Tier 1 capital ratio improved for the fourth consecutive quarter, to 7.40 percent.

Note: The first half of 2000 included the results of businesses that were divested in connection with the strategic repositioning announced in June 2000, as well as extraordinarily strong principal investing revenue.

CHARLOTTE, N.C. - First Union (NYSE:FTU) today reported second quarter 2001 cash operating earnings of $723 million, or 73 cents per share; operating earnings of $649 million, or 66 cents per share; and net income of $633 million, or 64 cents per share. Highlights of the quarter included broad revenue growth, solid expense control, strengthened capital ratios and improved loan losses.

In the six months ended June 30, 2001, cash operating earnings were $1.4 billion, or $1.43 per share; operating earnings were $1.3 billion, or $1.28 per share; and net income was $1.2 billion, or $1.23 per share.

The cash operating return on average tangible stockholders' equity was 23.35 percent in the second quarter of 2001. Cash operating earnings are operating earnings before goodwill and other intangible amortization. Based on second quarter 2001 operating earnings, First Union's return on average stockholders' equity was 16.19 percent.

"These strong operating results underscore First Union's momentum. We are extremely pleased with the revenue growth in all of our businesses this year, particularly the excellent results from our General Bank," said Ken Thompson, First Union chairman and CEO. "In addition, capital ratios improved, credit quality was stable and expenses decreased as expense management becomes more and more a part of our culture.

"With our restructuring now complete, we are seeing the results, which we believe provide us a firm foundation for continued growth. We achieved these solid results while continuing to make excellent progress on planning for a smooth integration with our merger partner, Wachovia. This is exactly the right platform to leverage our strengths, and continue building value for shareholders. We have enormous optimism about our future together," he said.

Net Interest Income
Net interest income on a tax-equivalent basis was $1.7 billion in the second quarter of 2001, a 10 percent decline from $1.9 billion in the second quarter of 2000, largely due to the reduction in earning assets related to the sale of loans and securities in connection with First Union's strategic repositioning announced in June 2000. The net interest margin was 3.41 percent in the second quarter of 2001 and 3.51 percent in the second quarter of 2000.

Fee and Other Income
On an operating basis, fee and other income in the second quarter of 2001 was $1.6 billion, down 7 percent from the second quarter of 2000, attributable to a $263 million decline in principal investing revenue, partially offset by across-the-board growth in other fee income categories. On an operating basis, fee and other income as a percentage of total revenue was 48 percent in the second quarter of 2001 and 47 percent in the second quarter of 2000.

Provision for Loan Losses
The loan loss provision was $223 million in the second quarter of 2001, a decline of $5 million from the second quarter of 2000. The provision exceeded net charge-offs by $66 million. At June 30, 2001, the ratio of allowance to net loans increased to 1.44 percent from 1.33 percent at June 30, 2000.

Noninterest Expense
On an operating basis, noninterest expense was $2.2 billion in the second quarter of 2001, down 8 percent from the second quarter of 2000, reflecting the winding down of divested businesses and solid expense control.

Restructuring and Other Charges and Gains
Restructuring and other charges and gains in the second quarter of 2001, primarily related to the 2000 strategic repositioning, amounted to a pre-tax charge of $27 million ($16 million after-tax) or 2 cents per share.

Net Charge-offs and Nonperforming Assets
Net charge-offs amounted to $157 million in the second quarter of 2001, a decrease of $71 million from the second quarter of 2000. This represented 0.52 percent of average net loans, down 17 basis points from the second quarter of 2000.

At June 30, 2001, nonperforming assets were $1.6 billion, or 1.23 percent of net loans, foreclosed properties and assets held for sale, an increase of 30 percent from June 30, 2000. Second quarter 2001 nonperforming assets included $250 million of nonperforming assets classified as held for sale.

Lines of Business

The General Bank has three major business lines: Consumer, Commercial and Small Business. General Bank total revenue increased 9 percent from the second quarter of 2000. The General Bank produced record consumer loan volume and solid deposit growth in the second quarter of 2001, reflecting improved sales production, a beneficial rate environment and a renewed focus on attracting low cost core deposits. Fee and other income grew 30 percent year over year, led by higher mortgage-related income, service charges and other fee income. The Consumer provision increased $31 million, of which $18 million was related to a market valuation adjustment on nonperforming assets moved to assets held for sale and increased charge-offs on a more seasoned First Union Home Equity portfolio.

The Commercial and Small Business provisions increased $16 million. The impact of expense control initiatives was reflected in a 3 percent decline in noninterest expense from the second quarter of 2000 and an operating overhead efficiency ratio that improved from 67 percent in the second quarter of 2000 to 59 percent in the second quarter of this year.

Average loans increased 13 percent from the second quarter of 2000, with across-the-board strength in consumer lending, while commercial real estate and small business lending drove commercial lending growth. Average core deposits grew 2 percent from the second quarter of 2000, primarily in low cost interest checking, savings and money market accounts.

Overall customer satisfaction scores as measured by Gallup improved for the ninth consecutive quarter. Household retention also remained strong. Online customer growth continued to be rapid, with a 55 percent increase from June 30, 2000, to 2.9 million enrollments at June 30, 2001. This included 130,000 online wholesale enrollments, which grew 136 percent from June 30, 2000.

Capital Management includes Retail Brokerage Services, Asset Management, and Wealth and Trust Services. These businesses, with their balanced approach and multiple channels of distribution, performed solidly in the second quarter of 2001 as mutual fund assets and annuity sales through the bank channel reached an all-time high. Total revenue increased modestly from the second quarter of 2000 primarily due to increased brokerage production largely related to annuity sales, as well as the impact of the acquisitions since the second quarter of 2000. Noninterest expense increased 7 percent from the second quarter of 2000, primarily due to increased corporate allocations and these acquisitions.

In partnership with the General Bank, bank channel annuity sales reached a quarterly record of $717 million in the second quarter of 2001, a 54 percent increase from the second quarter of 2000. Mutual fund assets grew to a quarter-end record $90 billion, up 6 percent from year-end 2000, driven by strong money market inflows.

Assets under management increased modestly from year-end 2000 to $172 billion at June 30, 2001. Assets under management include $82 billion in trust assets in addition to the $90 billion in mutual fund assets.

Our Corporate and Investment Banking businesses offer a range of fixed income products, debt and equity products, structured products and advisory services for corporate and institutional clients. Total revenue declined 14 percent from the second quarter of 2000, primarily related to anticipated lower principal investing revenue, which was down $263 million from a strong second quarter of 2000. Excluding principal investing, revenue increased 21 percent and operating earnings were up 200 percent from the second quarter of 2000, reflecting broad line of business growth. Fixed income fee and other income increased 53 percent from the second quarter of 2000, primarily driven by fixed income sales and trading. The agency businesses, primarily merger and acquisition advisory services, loan syndications and equity capital markets, grew 3 percent from the second quarter of 2000. Noninterest expense decreased 4 percent from the second quarter of 2000.

First Union (NYSE:FTU), with $246 billion in assets and stockholders' equity of $16 billion at June 30, 2001, is a leading provider of financial services to 15 million retail and corporate customers throughout the East Coast and the nation. The company operates full-service banking offices in 11 East Coast states and Washington, D.C., and full-service brokerage offices in 47 states. Online banking and brokerage products and services can be accessed through www.firstunion.com.

Earnings Conference Call
First Union Chairman and CEO Ken Thompson and CFO Bob Kelly will review First Union's second quarter results in a conference call and audio webcast beginning at 9 a.m. today. Supplemental materials relating to the second quarter results are available on the Internet at www.ftuinvestor.com, and investors are encouraged to access such materials.

Webcast Instructions: To gain access to the webcast, which will be "listen-only," go to www.ftuinvestor.com and click on the link First Union Second Quarter Earnings Audio Webcast. In order to listen to the webcast, you will need to download Real Player Basic 8.

Teleconference Instructions: The telephone number for the conference call is 888-606-7037 for U.S. callers or 415-228-4891 for international callers. You will be asked to tell the answering coordinator your name and the name of your firm. Mention the conference Access Code: 33345.

Replay: Thursday, July 12, from noon until 5 p.m. EDT on Monday, July 23. Replay telephone number is 402-220-3026.

This news release and the conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements about the benefits of the merger between First Union Corporation and Wachovia Corporation, including future financial and operating results, cost savings, enhanced revenues, and accretion to reported earnings that may be realized from the merger; (ii) statements with respect to First Union's plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets", "projects" and similar expressions. These statements are based upon the current beliefs and expectations of First Union's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the risk that the businesses of First Union and Wachovia 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 ability to obtain governmental approvals of the merger on the proposed terms and schedule; (6) the failure of First Union's and Wachovia's stockholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength of the local economies in which First Union 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 First Union's loan portfolio and allowance for loan losses; (9) changes in the U.S. and foreign legal and regulatory framework; and (10) 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 First Union's and the combined company's investment banking and asset management activities. Additional factors that could cause First Union's results to differ materially from those described in the forward-looking statements can be found in First Union's reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction with Wachovia or other matters attributable to First Union or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. First Union does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

Additional Information
The proposed merger between First Union and Wachovia will be submitted to First Union's and Wachovia's stockholders for their consideration. Stockholders are urged to read the definitive joint proxy statement/prospectus regarding the proposed transaction and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain (or will contain) important information. You will be able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about First Union and Wachovia, at the SEC's Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC filings that have been or will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to First Union, Investor Relations, One First Union Center, Charlotte, North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations, 100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397).