AGE Edwards AG

ST. LOUIS, Sept. 20 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the second quarter and first half of fiscal 2008, which ended August 31, 2007. Net earnings for the quarter were $95 million, or $1.25 per diluted share, on net revenues of $821 million. For the same quarter last year, net earnings were $66 million, or $0.86 per diluted share, on net revenues of $713 million. For the first six months of fiscal 2008, net earnings were $178 million, or $2.34 per diluted share, on net revenues of $1.66 billion. For the same period last year, net earnings were $144 million, or $1.88 per diluted share, on net revenues of $1.48 billion. On May 31, 2007, the company announced a merger agreement with Wachovia Corporation, pursuant to which the company would merge with and into a wholly owned subsidiary of Wachovia Corporation. The first-quarter and first-half results include $10 million, or $0.08 per diluted share, in other expenses related to the merger agreement. A special meeting of stockholders of A.G. Edwards, Inc. is being held on Friday, Sept. 28, 2007 to consider and vote on the proposal to adopt the merger agreement and to consider and vote upon a proposal to approve the adjournment of the special meeting, including, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to adopt the merger agreement. "Thanks to the hard work and dedication of our employees serving clients during a difficult market environment in the second quarter, we were able to post increases in nearly every major revenue category," said Robert L. Bagby, chairman and chief executive officer. "In particular, client interest in fee- based services again led the way for our strong results, both in the second quarter and first half of the year." RESULTS OF OPERATIONS Asset management and service fees -- Asset-management and service-fee revenues for the second quarter increased 22 percent ($69 million) versus the second quarter last year. For the first six months of fiscal 2008, these revenues increased 19 percent ($118 million) versus last year's first six months. Results in both periods continued to reflect greater client interest in the firm's fee-based programs and services, particularly its fund-advisory programs, as well as increased client-asset values in mutual funds and insurance products. The results were enhanced by fees received in connection with the firm's FDIC-insured bank deposit program, which was not in operation during either time period last year. Since the program's launch in February 2007, clients have deposited approximately $7.2 billion into this program. Commissions -- Commission revenues for the second quarter increased 10 percent ($24 million) versus last year's second quarter and increased 3 percent ($16 million) versus last year's first half. The results in both time periods were mainly due to increased investor activity in individual equities, mutual funds and insurance products. Principal transactions -- Revenues from principal transactions increased 8 percent ($5 million) compared to the year-ago quarter. Compared to the first six months of last fiscal year, principal-transaction revenues increased 5 percent ($6 million). The increases in both periods reflected increased client activity in municipal securities and over-the-counter equity markets, partially offset by decreased activity in corporate-debt and agency securities. Investment banking -- Investment-banking revenues for the second quarter increased 13 percent ($7 million) versus the same three-month period last year. For the first six months of fiscal 2008, investment-banking revenues increased 57 percent ($59 million) compared to the same period last year. The results in both periods largely reflected higher revenue from closed-end funds. The six-month results additionally reflected greater fee revenue from private-placement transactions. Net interest revenue -- Interest revenue net of interest expense in the second quarter increased 10 percent ($5 million) from the year-ago quarter. For fiscal 2008's first half, net interest revenue increased 7 percent ($7 million) over last year's first half. The increases in both the second-quarter and six-month results reflected higher interest payments on the fixed-income inventory held for sale to clients and higher revenue from short-term investments, partially offset by lower average client margin balances. Other revenue -- Other revenue decreased 30 percent ($1 million) in the second quarter and decreased 59 percent ($20 million) for the first half of fiscal 2008 compared to the same periods last year. The decreases in other revenues for both the second quarter and first half of fiscal 2008 were mainly due to declines in the mark-to-market valuations of certain private-equity investments and stock-exchange shares the firm held. Non-interest expenses -- During the second quarter, non-interest expenses increased 11 percent ($66 million) compared to last year's second quarter. For the first six months of fiscal 2008, non-interest expenses increased 11 percent ($132 million) compared to the same period last fiscal year. Compensation and benefits increased 16 percent ($74 million) in this year's second quarter versus last year's second quarter. Comparing the first half of fiscal 2008 to the same period last year, compensation and benefits increased 14 percent ($127 million). The results in both periods mainly reflected higher commissionable revenue as well as higher incentive compensation due to increased firm profitability. Non-compensation-related expenses for fiscal 2008's second quarter decreased 5 percent ($8 million) compared to the same quarter last year. For this year's first six months, non-compensation-related expenses increased 2 percent ($5 million) versus last year's first six months. Both periods reflected lower branding-related expenses and lower business-development expenses compared to last year, which included expenses for the firm's national sales conference. Both periods also reflected $3 million in tax benefits due to the resolution of certain tax matters and lower expenses for addressing various regulatory changes and legal matters. The decreases in the six-month results were partially offset by expenses related to the merger agreement with Wachovia Corporation and increased technology-consulting expenses. ADDITIONAL STOCKHOLDER INFORMATION Total client assets at the end of the second quarter were $384 billion, an 8 percent increase when compared to the end of the second quarter last year. Client assets in fee-based accounts at the end of the second quarter of fiscal 2008 were $45 billion, a 12 percent increase when compared to the end of the second quarter of fiscal 2007. As of August 31, 2007, stockholders' equity was $2.3 billion, for a book value per share of $29.78. Diluted per-share earnings for the second quarter were based on 76.0 million average common and common equivalent shares outstanding compared to 76.7 million in the prior year. Diluted per-share earnings for the current six-month period were based on 76.0 million average common and common equivalent shares outstanding compared to 76.6 million in the prior year. ABOUT A.G. EDWARDS, INC. A.G. Edwards, Inc. is a financial services holding company whose primary subsidiary is the national investment firm of A.G. Edwards & Sons, Inc. Founded in 1887, A.G. Edwards and its affiliates employ 6,363 financial consultants in 739 offices nationwide and two European locations in London and Geneva. More information can be found on http://www.agedwards.com/. FORWARD-LOOKING STATEMENTS This material may contain forward-looking statements within the meaning of federal securities laws. Actual results are subject to risks and uncertainties, including both those specific to A.G. Edwards and those to the industry, which could cause results to differ materially from those contemplated. The risks and uncertainties include, but are not limited to, completion and closing of the merger agreement between A.G. Edwards and Wachovia Corporation (see below for additional information regarding the proposed transaction), general economic conditions, government monetary and fiscal policy, the actions of competitors, changes in and effects of marketing strategies, client interest in specific products and services, the completion of all contractual, technological, legal and other requirements for the introduction of new products or services, regulatory changes and actions, changes in legislation, risk management, the results of the AGE Bank Deposit Program and the expansion of powers of A.G. Edwards Trust Company FSB, legal claims, technology changes, compensation changes, the impact of outsourcing agreements, and the impact of Statement of Financial Accounting Standards No. 123 (Revised 2004) "Share-Based Payment." Undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this release. A.G. Edwards does not undertake any obligation to publicly update any forward-looking statements. This material references certain expenses associated with the execution of the merger agreement between Wachovia and A.G. Edwards. The proposed merger between Wachovia and A.G. Edwards (the "Merger") is subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by forward-looking statements for a variety of factors including: (1) the risk that the businesses of Wachovia and A.G. Edwards, in connection with the Merger will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) the risk that expected revenue synergies and cost savings from the Merger may not be fully realized or realized within the expected time frame; (3) the risk that 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 inability to obtain governmental approvals of the Merger on the proposed terms and schedule; (6) the failure of A.G. Edwards' shareholders to approve the Merger; (7) the risk that the strength of the United States economy in general and the strength of the local economies in which Wachovia and/or A.G. Edwards 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; (8) 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; (9) potential or actual litigation; (10) inflation, interest rate, market and monetary fluctuations; and (11) 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 and A.G. Edwards' brokerage and capital markets activities. Additional factors that could cause Wachovia's and A.G. Edwards' results to differ materially from those described in the forward-looking statements can be found in Wachovia's and A.G. Edwards' Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC. All subsequent written and oral forward-looking statements concerning A.G. Edwards or the proposed Merger or other matters and attributable to Wachovia or A.G. Edwards or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Wachovia and A.G. Edwards do not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this material. ADDITIONAL INFORMATION The proposed Merger has been submitted to A.G. Edwards' shareholders for their consideration. Wachovia filed on August 30 a registration statement with the SEC, which includes a proxy statement/prospectus regarding the proposed Merger. A.G. Edwards' shareholders and other investors are urged to read the registration statement and the proxy statement/prospectus, as well as any other relevant documents concerning the proposed Merger filed with the SEC (and any amendments or supplements to those documents), because they contain important information. You can obtain a free copy of the registration statement and the proxy statement/prospectus, as well as other filings containing information about Wachovia and A.G. Edwards, at the SEC's website (http://www.sec.gov/) and at the companies' respective websites, http://www.wachovia.com/ and http://www.agedwards.com/. Copies of the proxy statement/prospectus and the SEC filings that are incorporated by reference in the proxy statement/prospectus can also be obtained, free of charge, by directing a request to Wachovia Corporation, Investor Relations, One Wachovia Center, 301 South College Street, Charlotte, NC 28288-0206, 704-383-0798; or to A.G. Edwards, Inc., Investor Relations, One North Jefferson Avenue, St. Louis, MO 63103, 314-955-3782. Wachovia and A.G. Edwards and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies from the shareholders of A.G. Edwards in connection with the proposed Merger. Information about the directors and executive officers of Wachovia is set forth in the proxy statement for Wachovia's 2007 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 9, 2007. Information about the directors and executive officers of A.G. Edwards is set forth in the proxy statement for A.G. Edwards' 2007 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on May 15, 2007. Additional information regarding the interests of those participants and other persons who may be deemed participants in the Merger may be obtained by reading the proxy statement/prospectus regarding the proposed Merger. You may obtain free copies of these documents as described in the preceding paragraph. A. G. EDWARDS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) (Unaudited) For the Three Months Ended August 31, August 31, Increase/ % 2007 2006 (Decrease) Chg. Revenues Asset management and service fees: Distribution fees $190,692 $164,131 $26,561 16.2 Fee-based accounts 140,314 115,203 25,111 21.8 Service fees 42,584 25,750 16,834 65.4 Total 373,590 305,084 68,506 22.5 Commissions: Equities 135,289 126,399 8,890 7.0 Mutual funds 56,597 51,046 5,551 10.9 Insurance 57,587 48,529 9,058 18.7 Futures and options 11,913 11,386 527 4.6 Other 269 342 (73) (21.3) Total 261,655 237,702 23,953 10.1 Principal transactions: Debt securities 37,020 35,871 1,149 3.2 Equities 22,657 19,285 3,372 17.5 Total 59,677 55,156 4,521 8.2 Investment banking: Underwriting fees and selling concessions 48,122 40,003 8,119 20.3 Management fees 15,867 16,709 (842) (5.0) Total 63,989 56,712 7,277 12.8 Interest: Margin account balances 34,504 39,020 (4,516) (11.6) Securities owned and deposits 29,232 20,030 9,202 45.9 Total 63,736 59,050 4,686 7.9 Other 2,938 4,206 (1,268) (30.1) Total Revenues 825,585 717,910 107,675 15.0 Interest expense 4,128 4,682 (554) (11.8) Net Revenues 821,457 713,228 108,229 15.2 Non-Interest Expenses Compensation and benefits 525,131 451,366 73,765 16.3 Communication and technology 64,008 63,347 661 1.0 Occupancy and equipment 37,951 37,845 106 0.3 Marketing and business development 14,059 17,870 (3,811) (21.3) Floor brokerage and clearance 4,661 5,548 (887) (16.0) Other 29,050 32,890 (3,840) (11.7) Total Non-Interest Expenses 674,860 608,866 65,994 10.8 Earnings Before Income Taxes 146,597 104,362 42,235 40.5 Income Taxes 51,698 38,136 13,562 35.6 Net Earnings $94,899 $66,226 $28,673 43.3 Earnings per diluted share $1.25 $0.86 $0.39 45.3 Average Common and Common Equivalent Shares Outstanding (Diluted) 76,040 76,691 Stockholders' Equity $2,259,812 $2,009,699 Book Value per share $29.78 $26.40 Total Shares Outstanding (end of period) 75,878 76,115 A. G. EDWARDS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) (Unaudited) For the Six Months Ended August 31, August 31, Increase/ % 2007 2006 (Decrease) Chg. Revenues Asset management and service fees: Distribution fees $378,588 $330,569 $48,019 14.5 Fee-based accounts 274,849 227,263 47,586 20.9 Service fees 76,923 54,331 22,592 41.6 Total 730,360 612,163 118,197 19.3 Commissions: Equities 271,238 270,438 800 0.3 Mutual funds 123,553 118,161 5,392 4.6 Insurance 111,782 99,796 11,986 12.0 Futures and options 22,732 25,025 (2,293) (9.2) Other 749 608 141 23.2 Total 530,054 514,028 16,026 3.1 Principal transactions: Debt securities 69,069 65,865 3,204 4.9 Equities 44,998 42,439 2,559 6.0 Total 114,067 108,304 5,763 5.3 Investment banking: Underwriting fees and selling concessions 112,750 72,801 39,949 54.9 Management fees 51,340 31,998 19,342 60.4 Total 164,090 104,799 59,291 56.6 Interest: Margin account balances 67,803 76,977 (9,174) (11.9) Securities owned and deposits 51,199 35,714 15,485 43.4 Total 119,002 112,691 6,311 5.6 Other 14,125 34,399 (20,274) (58.9) Total Revenues 1,671,698 1,486,384 185,314 12.5 Interest expense 7,791 8,463 (672) (7.9) Net Revenues 1,663,907 1,477,921 185,986 12.6 Non-Interest Expenses Compensation and benefits 1,059,150 932,294 126,856 13.6 Communication and technology 135,471 123,236 12,235 9.9 Occupancy and equipment 75,281 73,861 1,420 1.9 Marketing and business development 35,525 43,419 (7,894) (18.2) Floor brokerage and clearance 7,603 9,100 (1,497) (16.5) Other 69,896 69,227 669 1.0 Total Non-Interest Expenses 1,382,926 1,251,137 131,789 10.5 Earnings Before Income Taxes 280,981 226,784 54,197 23.9 Income Taxes 102,833 82,935 19,898 24.0 Net Earnings $178,148 $143,849 $34,299 23.8 Earnings per diluted share $2.34 $1.88 $0.46 24.5 Average Common and Common Equivalent Shares Outstanding (Diluted) 76,030 76,633 Stockholders' Equity $2,259,812 $2,009,699 Book Value per share $29.78 $26.40 Total Shares Outstanding (end of period) 75,878 76,115 A. G. EDWARDS, INC. CONSOLIDATED FIVE-QUARTER SUMMARY (In thousands, except per share amounts) (Unaudited) For the Three Months Ended August May February November August 31, 31, 28, 30, 31, 2007 2007 2007 2006 2006 Revenues Asset management and service fees: Distribution fees $190,692 $187,896 $181,395 $172,326 $164,131 Fee-based accounts 140,314 134,535 127,383 119,886 115,203 Service fees 42,584 34,339 26,927 25,982 25,750 Total 373,590 356,770 335,705 318,194 305,084 Commissions: Equities 135,289 135,949 136,456 132,314 126,399 Mutual funds 56,597 66,956 69,527 56,343 51,046 Insurance 57,587 54,195 53,110 48,050 48,529 Futures and options 11,913 10,819 10,968 10,696 11,386 Other 269 480 247 218 342 Total 261,655 268,399 270,308 247,621 237,702 Principal transactions: Debt securities 37,020 32,049 30,161 31,694 35,871 Equities 22,657 22,341 23,005 21,966 19,285 Total 59,677 54,390 53,166 53,660 55,156 Investment banking: Underwriting fees and selling concessions 48,122 64,628 70,974 52,818 40,003 Management fees 15,867 35,473 41,495 19,802 16,709 Total 63,989 100,101 112,469 72,620 56,712 Interest: Margin account balances 34,504 33,299 33,671 35,546 39,020 Securities owned and deposits 29,232 21,967 26,936 22,453 20,030 Total 63,736 55,266 60,607 57,999 59,050 Other 2,938 11,187 35,954 21,390 4,206 Total Revenues 825,585 846,113 868,209 771,484 717,910 Interest expense 4,128 3,663 3,199 3,955 4,682 Net Revenues 821,457 842,450 865,010 767,529 713,228 Non-Interest Expenses Compensation and benefits 525,131 534,019 523,368 476,208 451,366 Communication and technology 64,008 71,463 69,866 64,736 63,347 Occupancy and equipment 37,951 37,330 39,019 37,584 37,845 Marketing and business development 14,059 21,466 15,862 17,669 17,870 Floor brokerage and clearance 4,661 2,942 5,106 4,895 5,548 Other 29,050 40,846 42,026 42,391 32,890 Total Non-Interest Expenses 674,860 708,066 695,247 643,483 608,866 Earnings Before Income Taxes 146,597 134,384 169,763 124,046 104,362 Income Taxes 51,698 51,135 60,586 45,719 38,136 Net Earnings $94,899 $83,249 $109,177 $78,327 $66,226 Earnings per diluted share $1.25 $1.10 $1.44 $1.03 $0.86 Average Common and Common Equivalent Shares Outstanding (Diluted) 76,040 76,021 76,024 76,411 76,691 Stockholders' Equity $2,259,812 $2,173,710 $2,102,039 $2,039,141 $2,009,699 Book Value per share $29.78 $28.69 $27.91 $27.02 $26.40 A.G. EDWARDS, INC. QUARTERLY STATISTICAL INFORMATION (Dollars in thousands, except per share amounts) (Unaudited) 2Q FY08 1Q FY08 4Q FY07 3Q FY07 2Q FY07 Net Revenues $821,457 $842,450 $865,010 $767,529 $713,228 Earnings Before Income Taxes $146,597 $134,384 $169,763 $124,046 $104,362 Net Earnings $94,899 $83,249 $109,177 $78,327 $66,226 Pre-tax Net Earnings as a Percent of Net Revenues 17.8% 16.0% 19.6% 16.2% 14.6% Average Diluted Shares- (000's Omitted) 76,040 76,021 76,024 76,411 76,691 Earnings Per Diluted Share $1.25 $1.10 $1.44 $1.03 $0.86 Dividends Per Share $0.20 $0.20 $0.20 $0.20 $0.20 Total Assets $5,239,146 $5,066,104 $5,312,118 $5,076,078 $4,708,961 Stockholders' Equity $2,259,812 $2,173,710 $2,102,039 $2,039,141 $2,009,699 Book Value Per Share $29.78 $28.69 $27.91 $27.02 $26.40 Return On Average Equity- (Quarter Results Annualized) 17.1% 15.6% 21.1% 15.5% 13.3% Financial Consultants 6,363 6,623 6,618 6,628 6,666 Full-time Employees 14,816 15,368 15,338 15,364 15,323 Locations 741 743 744 746 744 Total Client Assets (in millions) $384,000 $396,000 $374,000 $370,000 $354,000 Assets In Fee-based Accounts (in millions) $45,000 $48,000 $44,000 $42,000 $40,000 DATASOURCE: A.G. Edwards, Inc. CONTACT: Media, Byron Goodrich, +1-314-955-3235, , or Investors, Justin Gioia, +1-314-955-2379, , both of A.G. Edwards, Inc. Web site: http://www.agedwards.com/

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