UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2001

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Ex-
change Act of 1934

Commission File Number 1-9021

Wachovia Corporation

North Carolina 56-1473727
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Address and Telephone Number:

100 North Main Street 191 Peachtree Street NE
Winston-Salem, North Carolina 27101 Atlanta, Georgia 30303
(336) 770-5000 (404) 332-5000

Indicate by check mark whether the registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the regis-
trant was required to file such reports), and (2) has been subject to such fil-
ing requirements for the past 90 days. [X] Yes [ ] No

As of June 30, 2001, Wachovia Corporation had 203,322,801 shares of common
stock outstanding.

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

Page No.
--------

Consolidated Statements of Condition at June 30, 2001, December 31,
2000 and June 30, 2000.............................................. 2
Consolidated Statements of Income for the three and six months ended
June 30, 2001 and June 30, 2000..................................... 3
Consolidated Statements of Shareholders' Equity for the six months
ended June 30, 2001 and June 30, 2000............................... 4
Consolidated Statements of Cash Flows for the six months ended June
30, 2001 and June 30, 2000.......................................... 5
Notes to Consolidated Financial Statements........................... 6

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements regard-
ing Wachovia, including, without limitation, statements relating to Wachovia's
expectations with respect to revenue, credit losses, levels of nonperforming
assets, expenses, earnings and other measures of financial performance. Words
such as "may," "could," "would," "should," "believes," "expects," "antici-
pates," "estimates," "intends," "plans," "targets" or similar expressions are
intended to identify forward-looking statements. These forward-looking state-
ments are not guarantees of future performance and 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 ex-
pectations expressed in such forward-looking statements: (1) business increas-
es, productivity gains and other investments are lower than expected or do not
occur as quickly as anticipated; (2) competitive pressures among financial
services companies increase significantly; (3) the strength of the United
States economy in general and/or the strength of the local economies of the
States in which Wachovia conducts operations changes; (4) trade, monetary and
fiscal policies and laws, including interest rate policies of the Board of
Governors of the Federal Reserve System, change; (5) inflation, interest rates
and/or market conditions fluctuate; (6) conditions in the stock market, the
public debt market and other capital markets deteriorate, and impact
Wachovia's activities; (7) Wachovia fails to develop competitive new products
and services and/or new and existing customers do not accept these products
and services; (8) financial services' laws and regulations change; (9) tech-
nology changes and Wachovia fails to adapt to those changes; (10) consumer
spending and saving habits change; (11) unanticipated regulatory or judicial
proceedings occur; and (12) Wachovia is unsuccessful at managing the risks in-
volved in the foregoing. Additional information with respect to factors that
may cause actual results to differ materially from those contemplated by such
forward-looking statements may also be included in other reports that Wachovia
files with the Securities and Exchange Commission. Wachovia cautions that the
foregoing list of factors is not exclusive and not to place undue reliance on
forward-looking statements. Wachovia does not intend to update any forward-
looking statement, whether written or oral, relating to the matters discussed
in this Quarterly Report on Form 10-Q.

Consolidated Statements of Condition
- --------------------------------------------------------------------------------
($ in thousands, except per share) wachovia corporation and subsidiaries

June 30 December 31 June 30
2001 2000 2000
----------- ----------- -----------

Assets
Cash and due from banks................. $ 2,587,278 $ 3,686,871 $ 3,208,459
Interest bearing bank balances.......... 54,976 137,504 118,971
Federal funds sold and securities
purchased under resale agreements...... 631,129 788,618 202,273
Trading account assets.................. 2,084,549 960,838 1,457,467
Securities available-for-sale........... 6,276,448 7,487,696 7,088,977
Securities held-to-maturity (fair value
of $655,212, $1,052,535 and $1,109,096
respectively).......................... 625,327 1,023,750 1,101,461
Loans, net of unearned income........... 52,159,625 50,567,502 48,522,061
Less allowance for loan losses.......... 756,768 667,654 644,445
----------- ----------- -----------
Net loans............................. 51,402,857 49,899,848 47,877,616
Investment in discontinued operations... 354,495 392,469 403,154
Premises and equipment.................. 927,285 903,411 926,602
Due from customers on acceptances....... 62,782 82,008 80,917
Goodwill and other intangible assets.... 1,317,592 1,024,766 1,008,071
Other assets............................ 3,977,888 3,223,349 2,698,404
----------- ----------- -----------
Total assets.......................... $70,302,606 $69,611,128 $66,172,372
=========== =========== ===========
Liabilities
Deposits in domestic offices:
Demand................................. $ 8,525,977 $ 9,180,330 $ 8,783,729
Interest-bearing demand................ 5,380,199 5,116,571 4,885,151
Savings and money market savings....... 14,499,195 12,902,336 12,716,834
Savings certificates................... 9,474,735 9,534,778 9,530,065
Large denomination certificates........ 3,413,320 3,673,219 3,862,754
----------- ----------- -----------
Total deposits in domestic offices.... 41,293,426 40,407,234 39,778,533
Interest-bearing deposits in foreign
offices................................ 2,984,283 4,004,948 2,807,675
----------- ----------- -----------
Total deposits........................ 44,277,709 44,412,182 42,586,208
Federal funds purchased and securities
sold under repurchase agreements....... 7,167,806 6,753,164 7,440,013
Commercial paper........................ 1,990,469 1,855,923 1,649,239
Other short-term borrowed funds......... 1,893,562 1,253,058 2,172,587
Short-term borrowed funds allocated to
discontinued operations................ (3,136,636) (3,055,119) (3,204,459)
Long-term debt.......................... 10,006,181 10,808,218 8,858,331
Long-term debt allocated to discontinued
operations............................. (1,344,273) (1,309,337) (1,373,339)
Acceptances outstanding................. 62,782 82,008 80,917
Other liabilities....................... 2,929,531 2,526,492 2,026,831
----------- ----------- -----------
Total liabilities..................... 63,847,131 63,326,589 60,236,328
Shareholder's Equity
Preferred stock, par value $5 per share:
Authorized 50,000,000 shares; none
outstanding........................... -- -- --
Common stock, par value $5 per share:
Authorized 1,000,000,000 shares; issued
and outstanding 203,322,801,
203,423,606 and 203,267,427 shares,
respectively.......................... 1,016,614 1,017,118 1,016,337
Capital surplus......................... 704,933 731,162 721,378
Retained earnings....................... 4,727,783 4,505,947 4,277,886
Accumulated other comprehensive income
(loss)................................. 6,145 30,312 (79,557)
----------- ----------- -----------
Total shareholders' equity............ 6,455,475 6,284,539 5,936,044
----------- ----------- -----------
Total liabilities and shareholders'
equity............................... $70,302,606 $69,611,128 $66,172,372
=========== =========== ===========

Consolidated Statements of Income
- --------------------------------------------------------------------------------
(thousands, except per share) wachovia corporation and subsidiaries

Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------

Interest Income
Loans, including fees............. $ 978,522 $1,002,913 $2,019,301 $1,935,156
Securities available-for-sale..... 123,690 117,736 249,412 230,478
Securities held-to-maturity:
State and municipal.............. 3,554 3,727 7,342 7,367
Other investments................ 10,857 15,197 24,888 31,021
Interest-bearing bank balances.... 2,496 954 4,210 2,176
Federal funds sold and securities
purchased under resale
agreements....................... 8,010 6,796 16,436 14,288
Trading account assets............ 5,008 11,022 11,888 21,379
---------- ---------- ---------- ----------
Total interest income........... 1,132,137 1,158,345 2,333,477 2,241,865
Interest Expense
Deposits:
Domestic offices................. 338,002 346,818 704,868 669,676
Foreign offices.................. 38,001 62,308 84,987 114,230
---------- ---------- ---------- ----------
Total interest on deposits...... 376,003 409,126 789,855 783,906
Short-term borrowed funds......... 74,948 82,425 174,612 160,288
Long-term debt.................... 115,843 121,578 260,768 226,913
---------- ---------- ---------- ----------
Total interest expense.......... 566,794 613,129 1,225,235 1,171,107
Net Interest Income............... 565,343 545,216 1,108,242 1,070,758
Provision for loan losses......... 143,809 223,169 210,373 244,212
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses........ 421,534 322,047 897,869 826,546
Other Income
Service charges on deposit
accounts......................... 115,157 104,380 219,439 205,191
Fees for trust services........... 57,923 54,189 115,013 105,423
Investment fees................... 75,609 81,439 151,473 178,209
Capital markets income............ 45,581 45,014 93,747 89,800
Electronic banking................ 29,300 26,153 56,070 49,549
Mortgage fees..................... 14,955 5,921 23,323 10,922
Other operating income............ 72,600 66,119 174,120 130,361
---------- ---------- ---------- ----------
Total other operating revenue... 411,125 383,215 833,185 769,455
Securities gains.................. 97,180 59 106,256 226
---------- ---------- ---------- ----------
Total other income.............. 508,305 383,274 939,441 769,681
Other Expense
Salaries.......................... 283,179 270,569 551,995 546,262
Employee benefits................. 55,420 50,916 108,230 104,675
---------- ---------- ---------- ----------
Total personnel expense......... 338,599 321,485 660,225 650,937
Net occupancy expense............. 42,088 39,347 82,003 77,548
Equipment expense................. 43,250 44,806 87,343 92,928
Merger-related charges............ 11,670 8,872 11,670 17,030
Litigation settlement charge...... -- -- -- 20,000
Restructuring charge.............. -- -- 13,152 --
Other operating expense........... 150,024 147,793 301,581 284,243
---------- ---------- ---------- ----------
Total other expense............. 585,631 562,303 1,155,974 1,142,686
Income from continuing operations
before income tax expense........ 344,208 143,018 681,336 453,541
Income tax expense................ 121,030 44,287 241,207 152,843
---------- ---------- ---------- ----------
Income from continuing
operations....................... 223,178 98,731 440,129 300,698
Income from discontinued
operations, net of income tax.... 21,935 38,840 47,076 81,580
---------- ---------- ---------- ----------
Net Income........................ $ 245,113 $ 137,571 $ 487,205 $ 382,278
========== ========== ========== ==========
Income per common share --
continuing operations:
Basic............................ $ 1.09 .49 $ 2.14 $ 1.48
Diluted.......................... $ 1.08 .48 $ 2.12 $ 1.47
Net income per common share:
Basic............................ $ 1.19 .68 $ 2.37 $ 1.89
Diluted.......................... $ 1.18 .67 $ 2.35 $ 1.87
Average shares outstanding:
Basic............................ 205,595 202,728 205,827 202,596
Diluted.......................... 207,123 204,572 207,345 204,392

Consolidated Statement of Shareholders' Equity
- --------------------------------------------------------------------------------
($ in thousands, except per share) wachovia corporation and subsidiaries

Accumulated
Common Stock Other
----------------------- Capital Retained Comprehensive
Shares Amount Surplus Earnings Income (Loss) Total
----------- ---------- --------- ---------- ------------- ----------

Period ended June 30,
2000
Balance at beginning of
year................... 201,812,295 $1,009,061 $ 598,149 $4,125,524 $(74,277) $5,658,457
Net income............. 177,253 886 10,374 11,260
Other comprehensive
income, net of tax:
Unrealized losses on
securities available-
for-sale, net of
deferred tax benefit
and reclassification
adjustment........... (5,280) (5,280)
----------
Comprehensive
income*............ 376,998
Cash dividends declared
-- $1.08 a share....... (219,599) (219,599)
Common stock issued
pursuant to:
Stock option and
employee benefit
plans................. 800,534 4,003 43,752 47,755
Dividend reinvestment
plan.................. 382,278 382,278
Acquisitions........... 2,254,947 11,275 167,674 178,949
Common stock acquired... (1,777,602) (8,888) (98,571) (107,459)
Miscellaneous........... (10,317) (10,317)
----------- ---------- --------- ---------- -------- ----------
Balance at end of
period................. 203,267,427 $1,016,337 $ 721,378 $4,277,886 $(79,557) $5,936,044
=========== ========== ========= ========== ======== ==========
Period ended June 30,
2001
Balance at beginning of
year................... 203,423,606 $1,017,118 $ 731,162 $4,505,947 $ 30,312 $6,284,539
Net income............. 487,205 487,205
Other comprehensive
income, net of tax:
Unrealized losses on
securities available-
for-sale, net of
deferred tax benefit
and reclassification
adjustment........... (8,388) (8,388)
Minimum pension
liability
adjustment........... (15,207) (15,207)
Unrealized gains on
derivative financial
instruments
qualifying as cash
flow hedges.......... (572) (572)
-------- ----------
Comprehensive
income*............ 463,038
Cash dividends declared
-- $1.20 a share....... (243,993) (243,993)
Common stock issued
pursuant to:
Stock option and
employee benefit
plans................. 1,196,912 5,985 64,303 70,288
Dividend reinvestment
plan.................. 95,031 475 5,492 5,967
Acquisitions........... 6,775,695 33,878 394,957 428,835
Note conversions....... 5,183 26 76 102
Common stock acquired... (8,173,626) (40,868) (491,035) (531,903)
Miscellaneous........... (22) (21,376) (21,398)
----------- ---------- --------- ---------- -------- ----------
Balance at end of
period................. 203,322,801 $1,016,614 $ 704,933 $4,727,783 $ 6,145 $6,455,475
=========== ========== ========= ========== ======== ==========

* Comprehensive income for the second quarters of 2001 and 2000 was $176,656
and $146,140, respectively.

Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
($ in thousands) wachovia corporation and subsidiaries

Six Months Ended
June 30
----------------------
2001 2000
---------- ----------

Operating Activities
Net income............................................ $ 487,205 $ 382,278
Income from discontinued operations................... (47,076) (81,580)
---------- ----------
Income from continuing operations..................... 440,129 300,698
Adjustments to reconcile income from continuing
operations to net cash provided by operations:
Provision for loan losses............................. 210,373 244,212
Depreciation and amortization......................... 122,331 122,504
Deferred income taxes................................. 120,201 96,221
Securities gains...................................... (106,256) (226)
Loss on sale of noninterest-earning assets............ 654 334
Increase (decrease) in accrued income taxes........... 28,348 (3,439)
Decrease (increase) in accrued interest receivable.... 89,911 (24,543)
(Decrease) increase in accrued interest payable....... (127,883) 9,339
Net change in other accrued and deferred income and
expense.............................................. (171,528) (8,363)
Net trading account activities........................ 637,267 (587,163)
Net loans held for resale............................. (201,520) (3,356)
---------- ----------
Net cash provided by operating activities........... 1,042,027 146,218
Investing Activities
Net decrease in interest-bearing bank balances........ 96,805 56,113
Net decrease in federal funds sold and securities
purchased under resale agreements.................... 164,929 578,006
Purchases of securities available-for-sale............ (3,089,110) (646,876)
Purchases of securities held-to-maturity.............. (14,154) (126,786)
Sales of securities available-for-sale................ 1,475,969 361,371
Calls, maturities and prepayments of securities
available-for-sale................................... 1,206,137 355,891
Calls, maturities and prepayments of securities held-
to-maturity.......................................... 414,739 97,501
Net decrease (increase) in loans made to customers.... 513,453 (3,205,066)
Capital expenditures.................................. (45,163) (55,511)
Proceeds from sales of premises and equipment......... 10,337 3,312
Net decrease in other assets.......................... 252,185 91,976
Business combinations................................. 83,597 19,377
Net cash used by discontinued operations.............. (32,931) (173,560)
---------- ----------
Net cash provided (used) by investing activities.... 1,036,793 (2,644,252)
Financing Activities
Net increase (decrease) in demand, savings and money
market accounts...................................... 166,831 (874,838)
Net (decrease) increase in certificates of deposit.... (2,405,709) 1,161,479
Net increase in federal funds purchased and securities
sold under repurchase agreements..................... 228,464 2,063,641
Net increase (decrease) in commercial paper........... 134,546 (9,749)
Net increase (decrease) in other short-term
borrowings........................................... 389,004 (898,906)
Proceeds from issuance of long-term debt.............. 4,100 1,522,859
Maturities and repayments of long-term debt........... (1,284,773) (487,413)
Net increase in other liabilities..................... 327,538 92,423
Common stock issued................................... 41,706 23,602
Dividend payments..................................... (243,993) (219,599)
Common stock repurchased.............................. (536,127) (104,088)
---------- ----------
Net cash (used) provided by financing activities.... (3,178,413) 2,269,411
Decrease in Cash and Cash Equivalents (1,099,593) (228,623)
Cash and cash equivalents at beginning of year........ 3,686,871 3,437,082
---------- ----------
Cash and cash equivalents at end of period............ $2,587,278 $3,208,459
========== ==========

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)

Note 1 -- Basis of Presentation

In the opinion of management, the unaudited interim consolidated financial
statements include all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the results of operations for the periods present-
ed. The results of operations shown in the interim statements are not necessar-
ily indicative of the results that may be expected for the entire year.

Note 2 -- Discontinued Operations

On July 27, 2001, Wachovia completed the sale of its consumer credit card busi-
ness to Bank One Corporation. The capital made available by the transaction
will be redeployed for general corporate purposes including investing in higher
growth businesses, repurchasing shares, reducing balance sheet leverage or re-
ducing debt. The pre-tax gain from the sale is estimated to be approximately
$1.3 billion. As a result of the recent shareholder approval of the merger with
First Union Corporation, $450 million has been deferred in connection with cer-
tain provisions of the agent bank arrangement. Condensed financial information
for the consumer credit card business is presented below.

Three Months Ended Six Months Ended
June 30 June 30
---------------------- ---------------------
2001 2000 2001 2000
---------- ----------- ---------- ----------

Summary Income Statement
Interest income................... $ 138,403 $ 166,766 $ 287,259 $ 328,603
Allocated interest expense (2).... 50,652 72,600 112,566 140,483
---------- ---------- ---------- ----------
Net interest income.............. 87,751 94,166 174,693 188,120
Provision for loan losses......... 71,911 50,196 126,847 102,819
Noninterest income................ 74,447 87,084 143,973 171,643
Noninterest expense (3)........... 55,254 68,988 116,633 126,583
---------- ---------- ---------- ----------
Income before income tax
expense......................... 35,033 62,066 75,186 130,361
Income tax expense................ 13,098 23,226 28,110 48,781
---------- ---------- ---------- ----------
Net income....................... $ 21,935 $ 38,840 $ 47,076 $ 81,580
========== ========== ========== ==========

June 30 December 31 June 30
2001 2000 2000
---------- ----------- ----------

Summary Balance Sheet
Cash.............................. $ 39,351 $ 40,570 $ 52,329
Interest bearing bank balances.... 13,596 36,025 39,078
Securities available-for-sale..... 41,228 84,000 83,024
Loans, net of allowance........... 4,429,771 4,279,313 4,475,390
Intangible assets................. 211,529 231,461 249,816
Other assets...................... 144,828 141,624 141,960
---------- ---------- ----------
Total assets..................... $4,880,303 $4,812,993 $5,041,597
========== ========== ==========
Short-term borrowed funds (2)..... $3,136,636 $3,055,119 $3,204,459
Long-term debt (2)................ 1,344,273 1,309,337 1,373,339
Other liabilities................. 44,899 56,068 60,645
Total liabilities................ 4,525,808 4,420,524 4,638,443
Equity capital (1)................ 354,495 392,469 403,154
---------- ---------- ----------
Total liabilities and equity..... $4,880,303 $4,812,993 $5,041,597
========== ========== ==========

(1) Equity capital was assigned to discontinued operations based upon
Wachovia's targeted Tier I risk-based capital requirements for the under-
lying risk weighted assets and off-balance sheet items.
(2) Interest-bearing liabilities were assigned to discontinued operations
based on an assumed funding mix of 70 percent short-term borrowings and 30
percent long-term debt. Interest expense was calculated by applying
Wachovia's average funding cost for each period and funding category to
the respective assigned average balances.
(3) The amount of general overhead costs allocated to discontinued operations
is the amount estimated to be eliminated upon completion of the transac-
tion.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Table 1
Selected Period-End Data
- --------------------------------------------------------------------------------

June 30
---------------
2001 2000
------- -------

Banking offices:
North Carolina................................................. 183 190
Virginia....................................................... 193 212
Georgia........................................................ 122 142
South Carolina................................................. 115 118
Florida........................................................ 135 38
------- -------
Total......................................................... 748 700
======= =======
Automated banking machines:
North Carolina................................................. 444 454
Virginia....................................................... 265 285
Georgia........................................................ 301 313
South Carolina................................................. 266 286
Florida........................................................ 141 39
------- -------
Total......................................................... 1,417 1,377
======= =======
Employees (full-time equivalent)*.............................. 20,677 21,509
Common stock shareholders of record............................ 50,053 51,377
Common shares outstanding (thousands).......................... 203,323 203,267

* Includes personnel employed in discontinued operations.

Common Stock Data -- Per Share Table 2
- --------------------------------------------------------------------------------

2001 2000
---------------- -------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------

Market value:
Period-end..................... $71.15 $60.25 $58.13 $56.69 $54.25
High........................... 71.25 69.36 58.56 60.38 75.25
Low............................ 57.31 54.50 47.44 53.38 53.56
Book value at period-end......... 31.75 32.64 30.89 29.93 29.20
Dividend......................... .60 .60 .60 .60 .54
Price/earnings ratio (1)......... 15.6x 14.9x 14.3x 13.7x 12.3x
Price/earnings ratio without
nonrecurring items (1), (2)..... 14.2 13.4 12.7 12.3 11.9

(1) Based on the most recent four quarters of net income per diluted share and
end of period stock price.
(2) Excludes the after-tax impact of nonrecurring charges.

Financial Summary Table 3
- --------------------------------------------------------------------------------

Twelve Six Months Ended
Months 2001 2000 June 30
Ended ---------------------- ---------------------------------- ----------------------
June 30 Second First Fourth Third Second
2001 Quarter Quarter Quarter Quarter Quarter 2001 2000
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

Summary of Operations
(thousands, except per
share data)
Interest income......... $4,790,826 $1,132,137 $1,201,340 $1,247,950 $1,209,399 $1,158,345 $2,333,477 $2,241,865
Interest expense........ 2,603,381 566,794 658,441 707,822 670,324 613,129 1,225,235 1,171,107
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income..... 2,187,445 565,343 542,899 540,128 539,075 545,216 1,108,242 1,070,758
Provision for loan
losses................. 356,392 143,809 66,564 68,536 77,483 223,169 210,373 244,212
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses............ 1,831,053 421,534 476,335 471,592 461,592 322,047 897,869 826,546
Other operating
revenue................ 1,634,541 411,125 422,060 381,362 419,994 383,215 833,185 769,455
Securities gains
(losses)............... 105,613 97,180 9,076 (480) (163) 59 106,256 226
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total other income...... 1,740,154 508,305 431,136 380,882 419,831 383,274 939,441 769,681
Personnel expense....... 1,254,091 338,599 321,626 280,994 312,872 321,485 660,225 650,937
Merger-related charges.. 23,598 11,670 -- -- 11,928 8,872 11,670 17,030
Litigation settlement
charge................. -- -- -- -- -- -- -- 20,000
Restructuring charge.... 120,639 -- 13,152 19,543 87,944 -- 13,152 --
Other expense........... 940,060 235,362 235,565 240,956 228,177 231,946 470,927 454,719
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total other expense..... 2,338,388 585,631 570,343 541,493 640,921 562,303 1,155,974 1,142,686
Income from continuing
operations before
income tax expense..... 1,232,819 344,208 337,128 310,981 240,502 143,018 681,336 453,541
Income tax expense...... 430,365 121,030 120,177 105,534 83,624 44,287 241,207 152,843
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations............. 802,454 223,178 216,951 205,447 156,878 98,731 440,129 300,698
Income from discontinued
operations, net of
income tax............. 134,781 21,935 25,141 39,259 48,446 38,840 47,076 81,580
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. $ 937,235 $ 245,113 $ 242,092 $ 244,706 $ 205,324 $ 137,571 $ 487,205 $ 382,278
========== ========== ========== ========== ========== ========== ========== ==========
Income per common
share -- continuing
operations:
Basic.................. $ 3.92 $ 1.09 $ 1.05 $ 1.01 $ .77 $ .49 $ 2.14 $ 1.48
Diluted................ $ 3.91 $ 1.08 $ 1.05 $ 1.01 $ .77 $ .48 $ 2.12 $ 1.47
Net income per common
share:
Basic.................. $ 4.57 $ 1.19 $ 1.17 $ 1.20 $ 1.01 $ .68 $ 2.37 $ 1.89
Diluted................ $ 4.55 $ 1.18 $ 1.17 $ 1.20 $ 1.00 $ .67 $ 2.35 $ 1.87
Cash dividends paid per
common share........... $ 2.40 $ .60 $ .60 $ .60 $ .60 $ .54 $ 1.20 $ 1.08
Cash dividends paid on
common stock........... $ 487,412 $ 121,566 $ 122,427 $ 121,429 $ 121,990 $ 109,505 $ 243,993 $ 219,599
Cash dividend payout
ratio.................. 52.01% 49.60% 50.57% 49.62% 59.41% 79.60% 50.08% 57.44%
Average basic shares
outstanding............ 204,592 205,595 206,061 203,407 203,347 202,728 205,827 202,596
Average diluted shares
outstanding............ 205,914 207,123 207,569 204,393 204,621 204,572 207,345 204,392
Selected Average
Balances (millions)
Total assets............ $ 68,287 $ 70,613 $ 69,463 $ 67,607 $ 65,514 $ 64,792 $ 70,042 $ 63,911
Loans -- net of unearned
income................. 50,528 52,225 51,295 50,045 48,584 47,451 51,762 46,586
Securities.............. 8,532 8,744 8,903 8,350 8,140 8,323 8,823 8,331
Other interest-earning
assets................. 1,243 1,286 1,208 1,323 1,155 1,206 1,247 1,214
Total interest-earning
assets................. 60,303 62,255 61,406 59,718 57,879 56,980 61,832 56,131
Interest-bearing
deposits............... 35,770 37,049 35,727 35,518 34,800 35,663 36,392 35,268
Short-term borrowed
funds.................. 6,643 6,845 7,184 6,447 6,111 5,376 7,014 5,504
Long-term debt.......... 8,881 8,983 9,430 8,873 8,252 7,460 9,205 7,066
Total interest-bearing
liabilities............ 51,295 52,877 52,341 50,838 49,163 48,499 52,611 47,838
Noninterest-bearing
deposits............... 8,407 8,460 8,264 8,428 8,474 8,373 8,363 8,346
Total deposits.......... 44,177 45,509 43,991 43,946 43,274 44,036 44,755 43,614
Shareholders' equity.... 6,245 6,528 6,439 6,069 5,952 5,833 6,484 5,760
Ratios (averages)
Annualized net loan
losses to loans........ .53% .66% .48% .36% .64% .19% .57% .19%
Annualized net yield on
interest-earning
assets................. 3.68 3.69 3.64 3.66 3.77 3.92 3.67 3.90
Annualized return on
assets (2)............. 1.37 1.27 1.26 1.22 .96 .61 1.26 .95
Annualized return on
shareholders' equity
(2).................... 15.01 14.50 14.31 14.45 11.26 7.27 14.41 11.20
Operating Performance
(1)
(thousands, except per
share data)
Income from continuing
operations............. $ 898,108 $ 230,763 $ 227,400 $ 218,150 $ 221,795 $ 104,497 $ 458,163 $ 326,267
Income from continuing
operations per share... $ 4.36 $ 1.11 $ 1.10 $ 1.07 $ 1.08 $ .51 $ 2.21 $ 1.60
Annualized return on
assets (2)............. 1.32% 1.31% 1.32% 1.30% 1.36% .65% 1.32% 1.03%
Annualized return on
shareholders' equity
(2).................... 14.38 14.99 15.00 15.34 15.92 7.70 15.00 12.15

(1) Excludes the effects of nonrecurring merger-related, litigation settlement
and restructuring charges.
(2) Computed as net income from continuing operations divided by assets and
equity attributable to continuing operations.

RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q should be read in conjunction with
Wachovia's 2000 Annual Report on Form 10-K, and will serve to update previously
reported information for current interim period results.

Overview

The U.S. economy continued to slow through the second quarter of 2001 with
gross domestic product rising 0.7 percent for the quarter, the weakest quarter
of gross domestic product growth since the first quarter of 1993. Consumer
spending was reported to be lackluster in most of the Federal Reserve's twelve
districts and several districts reported that manufacturing activity and com-
mercial real estate and construction slowed. Labor markets began to show signs
of overall easing as most Federal Reserve districts reported only modest pres-
sure on wages. Based on preliminary data, the nation's average unemployment
rate increased to 4.5 percent from 4.0 percent in December and June 2000.
Within Wachovia's five-state operating area, unemployment averaged 4.0 percent
during the quarter.

During the second quarter, the Federal Open Markets Committee ("FOMC") took ac-
tion on three separate occasions to further reduce the federal funds target by
a total of 125 basis points, following four reductions totaling 200 basis
points during the first quarter. Concurrent with each FOMC action, the Board of
Governors of the Federal Reserve also lowered the discount rate by an equal
amount. The FOMC cited softening capital investment, erosion in profitability,
weak expansion of consumption and slowing growth abroad in arriving at its de-
cisions.

On April 16, 2001, Wachovia announced an agreement for a merger of equals
transaction with First Union Corporation. Terms of the agreement call for com-
mon stockholders of Wachovia to receive 2.0 shares of common stock of First
Union and the option to receive either a special dividend of $.48 or 2.0 Divi-
dend Equalization Preferred Shares (DEPS) in exchange for each share of Wacho-
via common stock. The DEPS allow Wachovia shareholders to continue to receive
at least a $2.40 per share dividend post-combination that they currently re-
ceive as Wachovia shareholders. The merger with First Union is expected to
close in the third quarter, subject to regulatory approval and certification of
Wachovia's shareholder vote. Wachovia's shareholders met August 3 to vote on
the proposed merger. Based on a preliminary count, Wachovia's management be-
lieves sufficient votes were obtained to approve the merger.

On March 1, 2001 Wachovia completed its acquisition of Republic Security Finan-
cial Corporation, parent company of Republic Security Bank. The acquisition
added more than 178,000 new customers and significantly expanded Wachovia's
presence in Florida. On May 1, 2001 Wachovia completed its acquisition of Ham-
ilton Dorsey Alston Company, an Atlanta-based insurance broker that specializes
in personal and commercial risk management and employee benefits. The results
of operations of both acquired companies are included in the consolidated fi-
nancial statements from their respective acquisition dates.

During the third quarter of 2000, Wachovia announced plans to realign resources
and eliminate 1,800 positions as part of a continuing performance improvement
project. Wachovia incurred $13 million in charges during the first quarter of
2001 to complete the resource realignment.

On July 27, 2001, Wachovia completed the sale of its consumer credit card busi-
ness. The pre-tax gain from the sale is expected to be approximately $1.3 bil-
lion, of which $450 million has been deferred. Accordingly, the consumer credit
card business is being presented as discontinued operations in the financial
statements and accompanying schedules. All financial discussion is for continu-
ing operations unless otherwise stated.

Computation of Earnings Per Common Share Table 4
- --------------------------------------------------------------------------------
(thousands, except per share)

Three Months Ended Six Months Ended
June 30 June 30
------------------- -----------------
2001 2000 2001 2000
--------- --------- -------- --------

Basic
Average common shares outstanding....... 205,595 202,728 205,827 202,596
========= ========= ======== ========
Income from continuing operations....... $ 223,178 $ 98,731 $440,129 $300,698
Income from discontinued operations..... 21,935 38,840 47,076 81,580
--------- --------- -------- --------
Net income............................ $ 245,113 $ 137,571 $487,205 $382,278
========= ========= ======== ========
Per share amount:
Continuing operations.................. $ 1.09 $ .49 $ 2.14 $ 1.48
Discontinued operations................ .10 .19 .23 .41
--------- --------- -------- --------
Net income............................ $ 1.19 $ .68 $ 2.37 $ 1.89
========= ========= ======== ========
Diluted
Average common shares outstanding....... 205,595 202,728 205,827 202,596
Dilutive common stock options at average
market price........................... 1,387 1,640 1,393 1,590
Dilutive common stock awards at average
market price........................... 123 181 105 184
Convertible long-term debt assumed
converted.............................. 18 23 20 22
--------- --------- -------- --------
Average diluted shares outstanding..... 207,123 204,572 207,345 204,392
========= ========= ======== ========
Income from continuing operations....... $ 223,178 $ 98,731 $440,129 $300,698
Add interest on convertible long-term
debt, net of tax....................... 16 11 32 28
--------- --------- -------- --------
Adjusted income from continuing
operations............................. 223,194 98,742 440,161 300,726
Income from discontinued operations..... 21,935 38,840 47,076 81,580
--------- --------- -------- --------
Adjusted net income.................... $ 245,129 $ 137,582 $487,237 $382,306
========= ========= ======== ========
Per share amount:
Continuing operations.................. $ 1.08 $ .48 $ 2.12 $ 1.47
Discontinued operations................ .10 .19 .23 .40
--------- --------- -------- --------
Net income............................ $ 1.18 $ .67 $ 2.35 $ 1.87
========= ========= ======== ========

Wachovia's operating net income, including the results of Wachovia's discontin-
ued consumer credit card business, was $253 million or $1.22 per diluted share
for the second quarter versus $143 million or $.70 per diluted share a year
earlier. Continuing operations, which excludes the consumer credit card busi-
ness, accounted for $231 million or $1.11 per diluted share of the total in the
second quarter of 2001 versus $104 million or $.51 per diluted share for the
same period a year ago. On a reported basis, net income, including discontinued
operations, was $245 million or $1.18 per diluted share for the quarter versus
$138 million or $.67 per diluted share a year earlier. These earnings included
$223 million or $1.08 per diluted share in the second quarter of 2001 and $99
million or $.48 per diluted share a year ago from continuing operations.

Year-to-date, Wachovia's operating net income, including discontinued opera-
tions, was $505 million or $2.44 per diluted share compared with $408 million
or $2.00 per diluted share for the same period of 2000. Included in year-to-
date operating earnings were earnings of $458 million or $2.21 per diluted
share and $326 million or $1.60 per diluted share in 2001 and 2000, respec-
tively, from continuing operations. On a reported basis, earnings for the
first six months, including discontinued operations, were $487 million or
$2.35 per diluted share in 2001 compared with $382 million or $1.87 per di-
luted share a year earlier. Continuing operations accounted for $440 million
or $2.12 per diluted share of reported earnings in 2001 versus $301 million or
$1.47 per diluted share a year earlier.

Earnings from Wachovia's discontinued consumer credit card business were $22
million or $.10 per diluted share for the second quarter of 2001 compared with
$39 million or $.19 per diluted share a year ago. For the first six months,
the discontinued consumer credit card business produced earnings of $47 mil-
lion or $.23 per diluted share in 2001 compared with $82 million or $.40 per
diluted share a year earlier. The decline in profitability in the consumer
credit card business from the prior year reflects the changes in the overall
economy which produced a narrower interest rate spread and a higher net charge
off rate. These factors also reduced credit card fee income as they compressed
the amount Wachovia earns in excess of the investors' coupon on securitized
receivables.

Most of the improvement in earnings from continuing operations was due to a
lower provision for loan losses. The provision charged to earnings in second
quarter 2000 added more than $200 million to the allowance for loan losses
while the current period provision added $58 million to the allowance for loan
losses. While the balance of nonperforming loans is higher than a year ago, it
has declined significantly over the last two quarters. Noninterest income rose
from a year ago with deposit service charges and mortgage fee income leading
the growth. Origination activity in Wachovia's mortgage business remained
strong with lower interest rates. Wachovia's continued expansion in the insur-
ance business through recent acquisitions of DavisBaldwin and Hamilton Dorsey
Alston Company pushed insurance fees up from a year ago.

Operating earnings exclude nonoperating charges such as restructuring, merger
integration and a litigation settlement charge recorded in the first quarter
of 2000. Comparisons between the 2001 and 2000 periods are also impacted by
the results of acquisitions that are included in reported results from their
respective acquisition dates each year.

Expanded discussion of results of operations and financial condition follows.
Interest income is stated on a taxable equivalent basis, which is adjusted for
the tax-favored status of earnings from certain loans and securities. Refer-
ences to changes in assets and liabilities represent daily average levels un-
less otherwise noted.

Business Segments

Wachovia has four reportable business segments: Asset and Wealth Management,
Corporate, Consumer and Treasury & Administration.

Business segment results are reported on a management accounting basis. They
reflect evolving information needs specific to a company's business managers
and may differ by company due to wide discretion in application. As a result,
Wachovia's business segment results are not necessarily comparable with those
of other financial institutions with similar segments or with those of other
companies that compete directly in one or more of Wachovia's lines of busi-
ness. In addition, business segment results may be restated in the future as
Wachovia's management structure, information needs or reporting systems
evolve. Changes in management accounting, including the effect of presenting
Wachovia's consumer credit card business as discontinued operations, were im-
plemented during the year with prior periods restated to reflect the changes.

The provision for loan losses is charged to each business segment based on the
credit risk of each segment's loan portfolio. Operating expenses to support
business unit revenues are either charged directly as incurred or allocated
from support areas based on usage. In addition, general overhead expense that
cannot be specifically attributed to a business unit is allocated based on the
proportion of each segment's direct expenses to total direct expenses of the
combined segments. Income tax expense is calculated for each business segment
with a blended tax rate. This rate is adjusted as applicable for the assumed
tax effect of tax-exempt income and nondeductible intangible amortization ex-
pense.

Wachovia uses a marginal matched maturity funds transfer pricing methodology
for management reporting that evaluates the cash flows and repricing character-
istics of all balance sheet transactions at an instrument level by benchmarking
pricing decisions against Wachovia's wholesale cost of funds. This approach re-
moves most forms of interest rate risk, prepayment risk and liquidity risk from
the balance sheets of the business units and isolates them in Treasury & Admin-
istration for centralized evaluation and management.

Financial results by business segment are discussed below.

Business Segments Table 5
- --------------------------------------------------------------------------------
(Three Months Ended June 30)
(millions)

Asset and
Wealth Treasury & Total
Management Corporate Consumer Administration Eliminations Corporation
-------------- ---------------- ---------------- ---------------- -------------- ---------------
2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------

Operations
Summary
External net
interest
margin......... $ 40 $ 35 $ 589 $ 649 $ (7) $ (45) $ (50) $ (84) $ (7) $ (10) $ 565 $ 545
Internal funding
(charge)
credit......... (4) 3 (341) (405) 251 275 120 153 (26) (26) -- --
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------
Net interest
income*........ 36 38 248 244 244 230 70 69 (33) (36) 565 545
Total other
income......... 150 147 109 107 130 104 119 25 -- -- 508 383
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------
Total revenue... 186 185 357 351 374 334 189 94 (33) (36) 1,073 928
Provision for
loan losses.... 1 1 134 224 7 5 2 (7) -- -- 144 223
Other expense... 141 136 150 154 213 206 96 81 (15) (15) 585 562
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------
Profit
contribution... 44 48 73 (27) 154 123 91 20 (18) (21) 344 143
Allocated
expenses....... 23 19 24 24 28 31 (64) (63) (11) (11) -- --
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------
Pretax income
from continuing
operations..... 21 29 49 (51) 126 92 155 83 (7) (10) 344 143
Income tax
expense........ 9 11 18 (18) 46 32 55 29 (7) (10) 121 44
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------
Income from
continuing
operations..... $ 12 $ 18 $ 31 $ (33) $ 80 $ 60 $ 100 $ 54 $ -- $ -- $ 223 $ 99
====== ====== ======= ======= ======= ======= ======= ======= ====== ====== ======= =======
Percentage
contribution to
total
revenue**...... 16.8% 19.2% 32.3% 36.4% 33.8% 34.6% 17.1% 9.8%
Percentage
contribution to
total income
from continuing
operations..... 5.4% 18.2% 13.9% (33.3%) 35.9% 60.6% 44.8% 54.5%
Average Balances
Total assets.... $4,709 $4,003 $38,260 $37,950 $13,933 $10,465 $13,711 $12,374 $70,613 $64,792

* Net interest income is reported on a taxable equivalent basis by segment and
on a nontaxable equivalent basis for the Corporation. The difference is in-
cluded in the eliminations column.
** Percentage contribution to total revenue is based on the proportion of each
segment's revenue to the combined revenue of all segments.

Business Segments Table 6
- --------------------------------------------------------------------------------
(Six Months Ended June 30)
(millions)

Operations Summary
External net
interest margin... $ 83 $ 70 $ 1,247 $ 1,263 $ (47) $ (92) $ (159) $ (151) $ (16) $ (19) $ 1,108 $ 1,071
Internal funding
(charge) credit... (12) 5 (751) (777) 517 541 298 281 (52) (50) -- --
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------
Net interest
income*........... 71 75 496 486 470 449 139 130 (68) (69) 1,108 1,071
Total other
income............ 298 311 216 218 244 203 181 38 -- -- 939 770
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------
Total revenue..... 369 386 712 704 714 652 320 168 (68) (69) 2,047 1,841
Provision for loan
losses............ 3 1 190 242 9 10 8 (9) -- -- 210 244
Other expense...... 281 277 301 306 409 401 195 190 (30) (31) 1,156 1,143
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------
Profit
contribution..... 85 108 221 156 296 241 117 (13) (38) (38) 681 454
Allocated
expenses.......... 44 37 47 46 57 63 (126) (127) (22) (19) -- --
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------
Pretax income from
continuing
operations....... 41 71 174 110 239 178 243 114 (16) (19) 681 454
Income tax
expense.......... 18 28 64 40 88 64 87 40 (16) (19) 241 153
------ ------ ------- ------- ------- ------- ------- ------- ------ ------ ------- -------
Income from
continuing
operations....... $ 23 $ 43 $ 110 $ 70 $ 151 $ 114 $ 156 $ 74 $ -- $ -- $ 440 $ 301
====== ====== ======= ======= ======= ======= ======= ======= ====== ====== ======= =======
Percentage
contribution to
total revenue**... 17.4% 20.2% 33.7% 36.9% 33.8% 34.1% 15.1% 8.8%
Percentage
contribution to
total income from
continuing
operations........ 5.2% 14.3% 25.0% 23.2% 34.3% 37.9% 35.5% 24.6%
Average Balances
Total assets....... $4,621 $3,761 $38,908 $37,471 $13,066 $10,217 $13,447 $12,462 $70,042 $63,911

Asset and Wealth Management

Asset and Wealth Management aspires to be the preferred provider of integrated
investment and wealth management services in the Southeast and selected na-
tional markets. This is being achieved through a combination of a strong base
business and recent strategic acquisitions. On May 1, 2001, Asset and Wealth
Management completed the acquisition of Hamilton Dorsey Alston Company, an At-
lanta-based insurance broker that specializes in personal and commercial risk
management and employee benefits.

Products and Services. Asset and Wealth Management delivers innovative tailored
products and services through a variety of distribution channels. The Private
Financial Advisors group provides a full range of products and services to af-
fluent customers, including banking and credit services, tax planning and con-
sulting, trust services, portfolio management, estate planning, investment
counseling and insurance. Subsidiary companies OFFITBANK and Barry, Evans, Jo-
sephs & Snipes provide wealth management and specialized investment and insur-
ance products for the high-end of the affluent market.

Wachovia's brokerage business offers a wide variety of services and investment
products including the Wachovia Funds through full-service brokers and branch-
based investment consultants. Customers making their own investment decisions
can trade through Wachovia Investments Direct using a broker, a touch-tone tel-
ephone service or the Internet.

Wachovia Asset Management provides investment strategies and portfolio manage-
ment for individuals and institutions, in addition to managing the Wachovia
Funds. Institutional Client Services provides asset management, employee bene-
fit, retirement services and philanthropy management services to businesses,
endowments, foundations, and other institutions. Executive Services is a na-
tionally recognized leader in providing retirement and wealth accumulation
products for high-net-worth individuals. It also provides change-of-control and
employee benefit protection services to client management teams.

Industry Dynamics and Strategy. Within Wachovia's five-state geographic foot-
print, households are growing much faster than the national average, and over
the next five years, affluent households are expected to grow substantially.
Market volatility and the projected need for intergenerational wealth transfer
capabilities also are driving demand. These factors create an attractive market
opportunity. Asset and Wealth Management is uniquely positioned to take advan-
tage of this environment through its market presence, brand names and strategic
focus.

The competition in the wealth management business is increasing. Many financial
service providers pursue a product-based or silo approach to serving the afflu-
ent. Asset and Wealth Management's strategy is to provide a "relationship ap-
proach" such as the Private Financial Advisor model that coordinates and man-
ages a full range of services through a trusted financial advisor. This in-
volves a team approach to client service within the Asset and Wealth Management
business and across Wachovia's other business segments. The integration of re-
cent merger partners has allowed this business segment to increase its product
offerings, leverage existing services and expand distribution channels. In Sep-
tember 2000, Wachovia launched the Market Acceleration Project that expands the
penetration of the successful Private Financial Advisor model across Wachovia's
markets. The goal of the project is to increase profit by generating more suc-
cessful client leads and improving linkages among Wachovia's other lines of
business.

Financial Results. Asset and Wealth Management's profit contribution declined
$3 million or 7 percent to $44 million from the same quarter last year. Net in-
come was also down from a year ago by $5 million. While the business continued
to grow, the weakened economic environment, decline in market values of managed
assets and falling interest rates all negatively impacted margin loans, trading
commissions, investment fees and deposit spreads. Average loans and deposits
grew 23 percent and 4 percent, respectively, from the second quarter of 2000
with Private Financial Advisors leading the growth in both categories. Despite
the rise in loan and deposit volumes, net interest income dropped slightly due
to a shift in loan portfolio mix and a lag in pricing down deposits in an ef-
fort to attract and retain customer balances. Other income rose $4 million pri-
marily due to an increase in insurance commissions from the acquisitions of
DavisBaldwin and Hamilton Dorsey Alston Company. The increase in insurance com-
missions was partially offset by a decline in investment fees that reflected
weaker market conditions than a year ago. Noninterest expense increased $5 mil-
lion or 4 percent from second quarter 2000, primarily due to the expenses of
DavisBaldwin and Hamilton Dorsey Alston Company, although strategic spending on
the Market Acceleration Project and the expansion of OFFITBANK offices also
contributed to the increase. Excluding acquisitions, staff expense decreased $5
million or 6% from a combination of lower variable compensation and staff re-
ductions.

Year to date, Asset and Wealth Management's profit contribution declined $23
million or 21 percent to $85 million from the first half of 2000. Net income
was also down from a year ago by $20 million. The weaker economic environment
of the first half of 2001 sharply contrasted with the heavy equity trading vol-
umes and high market values experienced during 2000, particularly in the first
quarter. Loan and deposit volumes grew 25 percent and 5 percent, respectively,
led by Private Financial Advisors. Spread compression on deposits neutralized
much of the positive impact of the growth on net interest income as deposit
pricing intentionally lagged rate reductions in order to attract and retain
customer balances. Other income declined $13 million or 4 percent from a year
ago despite a $14 million increase in insurance premiums and commissions mostly
related to the acquisitions of DavisBaldwin and Hamilton Dorsey Alston Company
and a $10 million increase in trust fees. Investment fees were down $25 million
from the first half of 2000 as equity trading volumes declined with investor
confidence. Trading levels have remained depressed relative to the prior year.
Other expense was up $4

million or 1 percent from the first half of 2000. Excluding acquisitions, ex-
penses were down from a year ago reflecting internal cost control efforts and a
reduction in variable compensation. Asset and Wealth Management continued to
increase its strategic spending on the Market Acceleration Project and the ex-
pansion of OFFITBANK.

Corporate

Corporate aspires to be the preferred provider of financial services to commer-
cial clients in the Southeast and to selected client segments nationally and
overseas. To achieve this goal, Corporate works to know its customers better
than the competition; anticipate customer needs and provide innovative solu-
tions; align products, services and delivery channels with customer needs; and
serve customers through insightful, trusted professionals.

Products and Services. Corporate provides a comprehensive array of corporate
banking, investment banking, capital markets and industry-leading cash manage-
ment services through a variety of client-focused subsegments. Global Corporate
Finance serves the needs of domestic and multinational companies with annual
sales above $200 million. The group also serves selected industry sectors in-
cluding communications/technology and diversified financial services. The group
operates through offices in the Southeast, Boston, Chicago, London, Sao Paulo,
and Hong Kong.

Regional Corporate Finance serves 2,200 Southeastern companies with sales of
$25 million to $200 million. Business Banking serves 18,000 regional clients
with sales from $2 million to $25 million. A new Emerging Companies group tar-
gets smaller growth companies. Real Estate Finance serves 4,000 commercial real
estate developers, investors and REITs, primarily in the Southeast. Dealer Fi-
nance serves 2,500 automobile and other specialty finance customers throughout
the Southeast.

Capital Markets offers a variety of services including investment banking,
mergers and acquisitions, loan syndication finance, asset-backed finance, com-
mercial paper, corporate bonds, interest rate and foreign exchange risk manage-
ment, leasing, public equity research, sales and trading, private equity in-
vestments, third-party research and option trading execution. Capital Markets
closely aligns its products and services to meet the needs of each targeted
client subsegment.

Corporate also provides industry-leading treasury consulting and cash manage-
ment solutions through its Treasury Services Group. This area has been consist-
ently cited for its superior quality of service, technology, and operations
performance. The Treasury Services Group achieved top honors in the Phoenix-
Hecht Quality Index 2000 and ranks high in other important industry surveys. In
addition to treasury consulting, the group provides an array of cash management
products and has become a leading provider of Internet-based and wireless ac-
cess.

Industry Dynamics and Strategy. While general demand for corporate services re-
mains solid, the continuing credit cycle poses risk of weakness in certain do-
mestic activities. Softening general economic conditions, rising bond default
rates, the significant increase in credit rating downgrades versus upgrades,
greater incidence of public company bankruptcies, and the velocity of borrower
deterioration all evidence rising risk in the corporate lending environment.
Despite these challenging market conditions and a fiercely competitive industry
climate, Corporate maintains a strong market position in each of its client
segments.

Corporate's strategy to remain competitive is to build strong and long-lasting
relationships with targeted clients through deep knowledge of unmet needs com-
bined with superior execution. Dynamic and focused customer segmentation and
sales model development enhance customer service, productivity and performance.
Key to

this strategy is a sharp focus on Capital Markets products and improved invest-
ment banking expertise. In addition, Treasury Services is accelerating the de-
velopment of innovative new products and outsourcing services.

Financial Results. Corporate's profit contribution and net income increased
from the second quarter of 2000 due primarily to a lower provision for loan
losses. Net interest income increased $4 million or 2 percent compared with the
second quarter of 2000 as average loans also grew 2 percent with the increase
coming from Regional Corporate. The loan loss provision decreased $90 million
primarily due to an additional provision charge that added $200 million to the
allowance for loan losses in the second quarter of 2000. Other income increased
$2 million or 2 percent due to growth in deposit service charges and letter of
credit fees. Other expense decreased by $4 million or 3 percent primarily due
to lower staff expenses related to Wachovia's expense control initiatives. The
lower staff expense was offset by higher systems development costs in support
of product development initiatives.

Year to date profit contribution and net income increased as a result of a
lower provision for loan losses. Net interest income rose $10 million or 2 per-
cent based on a 5 percent increase in average loans outstanding. Growth in the
regional corporate portfolio offset a decline in the large corporate portfolio,
where credit exposure was reduced to improve returns on capital. The provision
for loan losses decreased $52 million or 21 percent due to aggressive steps to
build the allowance for loan losses in 2000 in light of the emerging credit cy-
cle. Other income dropped slightly due to softness in capital markets advisory
and syndication revenue, and amounts paid to third parties to assume certain
customer letters of credit. Increases in deposit service charges due to im-
proved pricing and letter of credit fees offset most of these decreases. Other
expense decreased $5 million or 2 percent due to a decline in staff expenses
and most other expense categories related to Wachovia's strategic cost control
initiative. Professional services expense increased related to legal expense in
support of loan workout activities, and systems development expense increased
due to product development initiatives.

Consumer

Consumer aspires to be the preferred provider of financial services to consum-
ers and small businesses in Wachovia's regional markets. To achieve this goal,
Consumer develops customer relationships for the greatest lifetime value, man-
ages the cost of the sales and service network and pursues opportunities to at-
tract and serve customers through traditional and digital channels. It targets
consumers, worksite groups and small businesses throughout the Southeast, of-
fering a broad array of competitively priced products and services. Consumer is
also important to the entire Wachovia franchise because of the value provided
to Wachovia's other business segments by its branch network, brand identity and
customer base.

Products and Services. Consumer provides traditional retail banking services,
including mortgage lending, deposit products and consumer loans, to 4 million
customers. It also offers access to investment and insurance products to these
customer segments. Wachovia ranks among the top ten nationally in Visa(R) Check
Card sales volume, according to a study conducted by Visa(R). Delivery channels
include 748 traditional and in-store branches and worksite centers, 1,417 ATMs
and 30 kiosks, Wachovia on Call and the Internet. Campus Card programs provide
card-based banking access to students and faculty at nine university campuses,
and Wachovia At Work serves employees of more than 5,200 companies and 237,000
consumers.

The Internet is growing in importance as a forum for financial services. Ap-
proximately 576,000 of Wachovia's demand deposit customers are enrolled in
Internet banking, up from approximately 500,000 at year-end and

375,000 a year ago. Wachovia's Internet site, wachovia.com, serves as a finan-
cial portal with extensive account information and transaction capability sup-
ported by relevant financial news.

Industry Dynamics and Strategy. Consumer operates in some of the country's most
attractive retail growth markets, including Florida, Georgia, South Carolina,
North Carolina and Virginia. The majority of Wachovia's deposits are in large,
high and medium-growth metropolitan areas within this region. Consumer's strat-
egy is to assess customer relationship potential, identify financial needs and
achieve alignment between needs, service expectations and cost, thereby deliv-
ering optimal value to each customer. Specific initiatives to implement this
strategy include:

. Information-Based Relationship Managementsm. Wachovia has developed strong
proprietary data collection and analytical tools around its customers' buying
and financial behaviors. These are used to proactively identify customer
needs for sales activities and targeted product development. The Profitable
Relationship Optimization (PRO) desktop technology connects to data ware-
houses and delivers targeted leads to Personal Financial Advisors, small
business and branch bankers. These bankers are trained to use solution-based
selling skills, supported by the PRO technology to better serve more than
400,000 high-potential customers. Focus is placed on creating sales and serv-
ice strategies to retain and grow targeted customers.

. Market Network Strategy. Network optimization models provide an analytical
framework to optimize customer points of presence while reducing branch net-
work expenses. This strategy drives network location and effectiveness,
branch and ATM openings, closings and consolidations, as well as staffing
strategies.

. Wachovia at Work and Campus Banking Programs. These strategies involve de-
ploying Wachovia products and services through employers and universities to
provide access to employees and students.

. Selective Geographic Expansion. Wachovia continues to evaluate expansion op-
portunities in high-growth areas. During the first quarter of 2000, Wachovia
completed the acquisition of Bank of Canton in the Atlanta area. Wachovia
completed the acquisition of the National Bank of Commerce in suburban Or-
lando in the second quarter of 2000. During the first quarter of 2001, Wacho-
via completed the acquisition of Republic Security Financial Corporation,
which serves 178,000 customers, giving Wachovia the 11th largest deposit
share in Florida. Also during the first quarter of 2001, Wachovia completed a
branch swap transaction that allows entry into the Tennessee market.

eBusiness activities at Wachovia are enterprise-wide. Advances in technology
are rapidly transforming the financial services industry. The eBusiness Divi-
sion provides corporate-wide eBusiness strategic planning, leadership and oper-
ational management for the entire corporation. Business units sponsor specific
Internet initiatives to meet the dynamic demands of their customer groups. This
collaborative structure maximizes the leverage from technology and research
with the necessary responsiveness to customer requirements and deliverables.
Wachovia's eBusiness strategy is to develop a personalized and seamlessly de-
livered customer experience when using wachovia.com and Wachovia's other web
sites, macroworld.net, ijlwachovia.com and offitbank.com. eBusiness activities
create value by aligning customer acquisition, retention, cross-selling and
cost reduction throughout all customer segment and delivery channels.

Financial Results. For the second quarter of 2001, Consumer's profit contribu-
tion increased $30 million or 24 percent from the same quarter last year. The
acquisition of Republic Security Bank and the branch dispositions in the third
quarter of 2000 affect comparability between periods. Net interest income in-
creased $13 million or

6 percent primarily due to the acquisition of Republic Security Bank as the
lower interest rate environment caused spread compression on deposits that off-
set the positive effect of increases in loan and deposit volumes. Deposit vol-
ume increases were led by growth in Premiere money market deposits. Other in-
come increased $25 million or 24 percent led by deposit service charges and
electronic banking fees as usage increased and mortgage fees, due to the lower
rate environment and from the addition of Republic Security Bank. Other expense
was up $7 million or 3 percent, caused primarily by Republic Security Bank and
an increase in mortgage expenses, particularly variable compensation, to handle
the increased origination volume.

For the six months, Consumer's profit contribution increased $55 million or 23
percent from the same period last year. The acquisitions of Bank of Canton, Na-
tional Bank of Commerce and Republic Security Bank and the branch dispositions
in the third quarter of 2000 affect comparability between periods. Net interest
income increased $21 million or 5 percent primarily due to the acquisition of
Republic Security Bank. Continued spread compression offset the positive effect
of increases in loan and deposit volumes when comparing the existing branches
to the same branches last year. Deposit volume increases were driven by an in-
crease in the Premiere money market product. Other income increased $41 million
or 20 percent led by deposit service charges, electronic banking fees and mort-
gage fees. The acquisition of Republic Security Bank contributed approximately
25 percent of the overall increase. Other expense was up $8 million or 2 per-
cent due to the inclusion of Republic Security Bank and an increase in variable
compensation costs associated with the increase in mortgage origination volume.
The expenses in the branch network were lower than the same period in the prior
year.

Treasury & Administration

The Treasury & Administration segment principally reflects asset and liability
management for interest rate risk, management of the securities portfolio, in-
ternal compensation for funding sources and charges for funds used. Other unal-
located corporate costs and certain nonrecurring expenses are also included.

Financial Results. Treasury & Administration's profit contribution increased
$72 million from the second quarter of 2000, primarily due to securities gains
recorded in the current quarter. Net income was up $46 million for the same pe-
riod. Other income increased $94 million from the second quarter of 2000, re-
flecting the securities gains. Other expense increased $15 million or 18 per-
cent mostly due to an increase in institutional incentive compensation related
to the improvement in Wachovia's earnings performance from the second quarter
of 2000. Merger integration charges also contributed to the increase as they
were $3 million greater than a year ago. Second quarter 2001 merger integration
charges were evenly split between the Republic Security Bank and the proposed
merger with First Union.

Year to date, Treasury & Administration's profit contribution and net income
were up $130 million and $82 million, respectively from the first six months of
2000. Net interest income increased $9 million. The average yield on the secu-
rities portfolio was down only 10 basis points from a year ago while the aver-
age rates on Wachovia's short-term borrowed funds and long-term debt dropped 84
basis points and 75 basis points, respectively, over the same period. The pro-
vision for loan losses increased $17 million from a year ago. Other income in-
creased $143 million from the first six months of 2000, primarily due to secu-
rities gains. Also included in 2001 other income is a $42 million gain on
Wachovia's equity investment in Star Systems, Inc. as a result of Star's acqui-
sition by a publicly held company. The $5 million or 3 percent increase in
other expense is due to a higher incentive compensation resulting from improved
business performance from a year ago. A $12 million decrease in nonrecurring
charges offset the increase in incentive compensation.

Taxable Equivalent Rate/Volume Analysis -- Second Quarter Table 7
- --------------------------------------------------------------------------------

Average Variance
Average Volume Rate Interest Attributable to
--------------- ----------- --------------------- -------------------
2001 2000 2001 2000 2001 2000 Variance Rate Volume
------- ------- ----- ----- ---------- ---------- -------- --------- --------
(millions) (thousands)

Interest income
Loans:
$16,209 $17,570 7.10 8.50 Commercial............ $ 286,865 $ 371,154 $(84,289) $ (57,305) $(26,984)
540 673 8.97 9.30 Tax-exempt............ 12,066 15,545 (3,479) (522) (2,957)
------- ------- ---------- ---------- --------
16,749 18,243 7.16 8.53 Total commercial..... 298,931 386,699 (87,768) (58,091) (29,677)
1,539 1,236 8.04 8.84 Direct retail......... 30,836 27,162 3,674 (2,595) 6,269
4,595 3,906 8.77 8.11 Indirect retail....... 100,538 78,756 21,782 6,905 14,877
Other revolving
952 800 10.35 11.28 credit................ 24,567 22,437 2,130 (1,930) 4,060
------- ------- ---------- ---------- --------
7,086 5,942 8.83 8.69 Total retail......... 155,941 128,355 27,586 2,113 25,473
3,995 2,797 7.43 9.96 Construction.......... 74,032 69,244 4,788 (20,264) 25,052
Commercial
9,501 8,206 7.63 8.48 mortgages............. 180,819 173,096 7,723 (18,232) 25,955
Residential
10,626 8,272 7.55 8.00 mortgages............. 199,984 164,611 35,373 (9,702) 45,075
------- ------- ---------- ---------- --------
24,122 19,275 7.56 8.49 Total real estate.... 454,835 406,951 47,884 (47,511) 95,395
2,789 2,694 6.92 9.08 Lease financing....... 48,139 60,794 (12,655) (14,751) 2,096
1,479 1,297 6.61 7.64 Foreign............... 24,377 24,636 (259) (3,496) 3,237
------- ------- ---------- ---------- --------
52,225 47,451 7.54 8.54 Total loans.......... 982,223 1,007,435 (25,212) (122,317) 97,105
Securities:
800 1,098 7.82 7.51 Held-to-maturity...... 15,596 20,490 (4,894) 837 (5,731)
7,944 7,225 6.37 6.75 Available-for-sale.... 126,129 121,199 4,930 (6,923) 11,853
------- ------- ---------- ---------- --------
8,744 8,323 6.50 6.85 Total securities..... 141,725 141,689 36 (7,144) 7,180
1,286 1,206 4.84 6.27 Other earning assets... 15,514 18,775 (3,261) (4,471) 1,210
------- ------- ---------- ---------- --------
Total interest-
62,255 56,980 7.34 8.24 earning assets........ 1,139,462 1,167,899 (28,437) (132,564) 104,127
Cash and due from
2,701 2,895 banks.................
Investment in
discontinued
372 402 operations............
5,993 4,958 Other Assets...........
Allowance for loan
(708) (443) losses................
------- -------
$70,613 $64,792 Total assets.........
======= =======
Interest Expense
Interest-bearing
$ 5,378 $ 4,793 1.27 1.46 demand................ 16,991 17,379 (388) (2,396) 2,008
Savings and money
14,369 13,305 3.54 4.20 market savings........ 126,828 139,095 (12,267) (22,918) 10,651
9,772 9,243 5.58 5.59 Savings certificates... 135,830 128,528 7,302 (381) 7,683
Large denomination
4,012 4,198 5.83 5.92 certificates.......... 58,354 61,816 (3,462) (881) (2,581)
------- ------- ---------- ---------- --------
Total interest-
bearing deposits in
33,531 31,539 4.04 4.42 domestic offices.... 338,003 346,818 (8,815) (30,313) 21,498
Interest-bearing
deposits in foreign
3,518 4,124 4.33 6.08 offices............... 38,000 62,308 (24,308) (16,082) (8,226)
------- ------- ---------- ---------- --------
Total interest-
37,049 35,663 4.07 4.61 bearing deposits.... 376,003 409,126 (33,123) (48,817) 15,694
Short-term borrowed
6,845 5,376 4.39 6.17 funds*................ 74,949 82,425 (7,476) (26,938) 19,462
8,983 7,460 5.17 6.55 Long-term debt*........ 115,842 121,578 (5,736) (28,146) 22,410
------- ------- ---------- ---------- --------
Total interest-
bearing
52,877 48,499 4.30 5.08 liabilities......... 566,794 613,129 (46,335) (99,109) 52,774
----- -----
3.04 3.16 Interest rate spread...
----- -----
Non interest-bearing
8,460 8,373 deposits..............
2,748 2,087 Other liabilities......
6,528 5,833 Shareholders' equity...
------- -------
Total liabilities
and shareholders'
$70,613 $64,792 equity.
======= =======
Net yield on interest-
earning assets and
3.69 3.92 net interest income... $ 572,668 $ 554,770 $ 17,898 (32,598) 50,496
===== ===== ========== ========== ========

Interest income and yields are presented on a fully taxable equivalent basis
using the federal income tax rate and state tax rates, as applicable, reduced
by the nondeductible portion of interest expense. Any variance attributable
jointly to volume and rate changes is allocated to the volume and rate vari-
ances in proportion to the relationship of the absolute dollar amount of the
change in each.
Securities available-for-sale are reported at amortized cost. Pretax unrealized
gains of $124 million in 2001 and pretax unrealized losses of $159 million in
2000 are included in other assets for purposes of this presentation.
* Net of amounts allocated to discontinued operations. See Note 2 to consoli-
dated financial statements.

Taxable Equivalent Rate/Volume Analysis -- Six Months Table 8
- --------------------------------------------------------------------------------

Average Variance
Average Volume Rate Interest Attributable to
---------------- ----------- --------------------- ------------------
2001 2000 2001 2000 2001 2000 Variance Rate Volume
------- ------- ----- ----- ---------- ---------- -------- -------- --------
(millions) (thousands)

Interest income
Loans:
$16,794 $17,393 7.61 8.28 Commercial............ $ 633,811 $ 716,050 $(82,239) $(57,653) $(24,586)
557 673 9.37 9.29 Tax-exempt............ 25,903 31,104 (5,201) 259 (5,460)
------- ------- ---------- ---------- --------
17,351 18,066 7.67 8.32 Total commercial..... 659,714 747,154 (87,440) (58,048) (29,392)
1,466 1,172 8.35 8.77 Direct retail......... 60,712 51,131 9,581 (2,573) 12,154
4,488 3,855 8.59 8.00 Indirect retail....... 191,104 153,382 37,722 11,604 26,118
Other revolving
933 773 10.99 11.21 credit................ 50,839 43,125 7,714 (856) 8,570
------- ------- ---------- ---------- --------
6,887 5,800 8.86 8.59 Total retail......... 302,655 247,638 55,017 8,089 46,928
3,763 2,626 7.97 9.45 Construction.......... 148,703 123,400 25,303 (21,652) 46,955
Commercial
9,373 8,100 7.96 8.40 mortgages............. 369,931 338,324 31,607 (18,728) 50,335
Residential
10,138 8,066 7.80 7.91 mortgages............. 392,184 317,391 74,793 (4,612) 79,405
------- ------- ---------- ---------- --------
23,274 18,792 7.89 8.34 Total real estate.... 910,818 779,115 131,703 (43,942) 175,645
2,812 2,650 7.45 9.32 Lease financing....... 103,939 122,731 (18,792) (25,894) 7,102
1,438 1,278 7.04 7.50 Foreign............... 50,235 47,685 2,550 (3,088) 5,638
------- ------- ---------- ---------- --------
51,762 46,586 7.90 8.39 Total loans.......... 2,027,361 1,944,323 83,038 (121,003) 204,041
Securities:
910 1,096 7.71 7.60 Held-to-maturity...... 34,783 41,443 (6,660) 568 (7,228)
7,913 7,235 6.49 6.59 Available-for-sale.... 254,779 237,108 17,671 (3,656) 21,327
------- ------- ---------- ---------- --------
8,823 8,331 6.62 6.72 Total securities..... 289,562 278,551 11,011 (4,592) 15,603
1,247 1,214 5.26 6.27 Other earning assets... 32,542 37,846 (5,304) (6,314) 1,010
------- ------- ---------- ---------- --------
Total interest-
61,832 56,131 7.66 8.10 earning assets........ 2,349,465 2,260,720 88,745 (128,543) 217,288
Cash and due from
2,768 2,921 banks.................
Investment in
discontinued
374 392 operations............
5,760 4,904 Other Assets...........
Allowance for loan
(692) (437) losses................
------- -------
$70,042 $63,911 Total assets.........
======= =======
Interest Expense
Interest-bearing
$ 5,215 $ 4,774 1.39 1.48 demand................ 36,000 35,225 775 (2,301) 3,076
Savings and money
13,904 13,334 3.92 4.08 market savings........ 270,520 270,226 294 (10,626) 10,920
9,758 9,104 5.75 5.44 Savings certificates... 278,074 246,265 31,809 14,006 17,803
Large denomination
4,029 4,112 6.02 5.77 certificates.......... 120,275 117,960 2,315 4,844 (2,529)
------- ------- ---------- ---------- --------
Total interest-
bearing deposits
in domestic
32,906 31,324 4.32 4.30 offices............. 704,869 669,676 35,193 3,025 32,168
Interest-bearing
deposits in foreign
3,486 3,944 4.92 5.82 offices............... 84,986 114,230 (29,244) (16,770) (12,474)
------- ------- ---------- ---------- --------
Total interest-
36,392 35,268 4.38 4.47 bearing deposits.... 789,855 783,906 5,949 (17,388) 23,337
Short-term borrowed
7,014 5,504 5.02 5.86 funds*................ 174,613 160,288 14,325 (25,184) 39,509
9,205 7,066 5.71 6.46 Long-term debt*........ 260,767 226,913 33,854 (28,602) 62,456
------- ------- ---------- ---------- --------
Total interest-
bearing
52,611 47,838 4.70 4.92 liabilities......... 1,225,235 1,171,107 54,128 (56,711) 110,839
----- -----
2.96 3.18 Interest rate spread...
----- -----
Non interest-bearing
8,363 8,346 deposits..............
2,584 1,967 Other liabilities......
6,484 5,760 Shareholders' equity...
------- -------
Total liabilities
and
shareholders'
$70,042 $63,911 equity..............
======= =======
Net yield on interest-
earning assets and
3.67 3.90 net interest income... $1,124,230 $1,089,613 $ 34,617 (69,902) 104,519
===== ===== ========== ========== ========

Interest income and yields are presented on a fully taxable equivalent basis
using the federal income tax rate and state tax rates, as applicable, reduced
by the nondeductible portion of interest expense. Any variance attributable
jointly to volume and rate changes is allocated to the volume and rate vari-
ances in proportion to the relationship of the absolute dollar amount of the
change in each.
Securities available-for-sale are reported at amortized cost. Pretax unrealized
gains of $108 million in 2001 and pretax unrealized losses of $154 million in
2000 are included in other assets for purposes of this presentation.
* Net of amounts allocated to discontinued operations. See Note 2 to consoli-
dated financial statements.

CONSOLIDATED FINANCIAL RESULTS

Net Interest Income

Wachovia's taxable equivalent net interest income from continuing operations
rose $18 million or 3.2 percent from the second quarter of 2000 to $573 mil-
lion. For the first six months, taxable equivalent net interest income from
continuing operations increased $35 million or 3.2 percent from the same period
a year ago. The Federal Reserve continued to lower short-term interest rates by
a total of 125 basis points during the second quarter and 325 basis points year
to date. The rate reductions followed six rate increases beginning in July of
1999 and ending with a 50 basis point increase on May 16, 2000 when the economy
appeared to be growing at an unsustainable pace leading to the perceived risk
of inflation. Upon each action by the Federal Reserve, Wachovia lowered or
raised its prime lending rate to keep pace with the changes in funding costs.
For second quarter 2001, Wachovia's average prime lending rate and the average
federal funds rate were 7.34 percent and 4.33 percent, respectively, compared
with 9.25 percent and 6.27 percent, respectively, a year ago.

Wachovia's net yield on interest-earning assets was 3.69 percent compared with
3.92 percent reported for the second quarter of 2000. Year to date, the net
yield on interest earnings assets was 3.67 percent compared with 3.90 percent a
year ago. The lower net yield on interest-earning assets in both the quarter
and year to date comparisons was caused primarily by intentionally lagging the
market in rate reductions on deposit products in order to attract and retain
balances. Although this strategy was successful in retaining deposits, much of
the growth from a year ago results from the acquisition of Republic Security
Bank. Loan growth continued to outpace growth in core deposits leading to
greater use of wholesale sources to fund loan demand. This contributed posi-
tively to net interest income, but had a slightly dilutive effect on the net
yield on interest-earning assets.

The average yield on interest-earning assets decreased 90 basis points from the
second quarter of 2000 and 44 basis points year to date, reflecting the change
in market rates. A positive shift in portfolio mix between commercial and re-
tail loans somewhat mitigated the decline in the average yield on interest
earning assets. The average yield in the commercial loan portfolio experienced
the largest decline while the yield on retail loans rose 14 basis points for
the quarter due to improved pricing in the indirect auto lending portfolio.

The average rate on interest-bearing liabilities decreased 78 basis points from
the second quarter of 2000 and was down 22 basis points year to date. In com-
paring both periods, most of the decline in rates occurred in Wachovia's whole-
sale funding sources as domestic deposit rates intentionally lagged market re-
ductions in order to attract and retain customer balances. The average rate on
savings certificates remained level with the second quarter of 2000 and in-
creased 31 basis points year to date due to special promotions in the latter
half of 2000. Much of the proceeds of maturing savings certificates migrated to
lower-rate money market accounts which helped lower the overall funding rate.

Related Balance Sheet Analysis

Solid growth in the retail and real estate loan portfolios offset the effect of
an intentional reduction in the large corporate portfolio leaving average total
loans $4.774 billion higher than the second quarter of 2000 and $2.180 billion
above the average for the fourth quarter of 2000. The acquisition of Republic
Security Bank accounted for approximately half of the growth from a year ago
and almost all of the increase from the fourth quarter. Commercial loans de-
clined $1.494 billion or 8.2 percent from the second quarter of 2000 as Wacho-
via

exited certain lending relationships that were not economically beneficial.
Much of the reduction in the commercial portfolio was the result of loan sales
due to favorable pricing in the secondary market. Retail loans grew $1.144
billion or 19.3 percent from second quarter 2000 with approximately half of
the increase from Republic Security Bank and the rest primarily due to strong
demand for automobile loans. The real estate loan portfolio grew $4.847 bil-
lion or 25.1 percent from a year ago with Republic Security accounting for ap-
proximately 30 percent of the growth, primarily in the residential category.

Period-End Loans by Category Table 9
- -------------------------------------------------------------------------------
(thousands)

June 30 March 31 Dec. 31 Sept. 30 June 30
2001 2001 2000 2000 2000
----------- ----------- ----------- ----------- -----------

Commercial.............. $15,670,375 $16,897,378 $17,660,562 $18,005,046 $17,823,579
Tax-exempt.............. 530,734 548,246 605,165 657,441 668,953
----------- ----------- ----------- ----------- -----------
Total commercial...... 16,201,109 17,445,624 18,265,727 18,662,487 18,492,532
Direct retail........... 1,548,071 1,514,825 1,338,265 1,286,724 1,270,661
Indirect retail......... 4,650,633 4,571,517 4,219,917 4,159,669 3,985,073
Other revolving credit.. 966,447 924,745 894,639 854,217 821,348
----------- ----------- ----------- ----------- -----------
Total retail.......... 7,165,151 7,011,087 6,452,821 6,300,610 6,077,082
Construction............ 4,217,670 3,746,881 3,370,031 3,206,898 2,960,285
Commercial mortgages.... 9,437,455 9,576,763 9,025,271 8,893,611 8,423,985
Residential mortgages... 10,845,122 10,394,934 9,234,080 8,987,962 8,558,292
----------- ----------- ----------- ----------- -----------
Total real estate..... 24,500,247 23,718,578 21,629,382 21,088,471 19,942,562
Lease financing......... 2,848,492 2,805,779 2,839,386 2,777,382 2,701,108
Foreign................. 1,444,626 1,385,747 1,380,186 1,295,778 1,308,777
----------- ----------- ----------- ----------- -----------
Total loans........... $52,159,625 $52,366,815 $50,567,502 $50,124,728 $48,522,061
=========== =========== =========== =========== ===========

Average balances of securities increased in comparison to both the second and
fourth quarters of 2000 partially due to the inclusion of the acquired Repub-
lic Security Bank portfolio. Although the average balances show an increase,
the period end balances dropped considerably from both prior periods as Wacho-
via sold securities in order to realize gains resulting from the lower rate
environment. The proceeds from sales are being reinvested in similar securi-
ties with longer maturities. This also accomplished changing Wachovia's inter-
est rate position to slightly liability sensitive. Wachovia and its affiliates
regularly purchase securities for their own accounts. In this connection,
since April 16, 2001 (the date on which the proposed merger of Wachovia and
First Union Corporation was announced), Wachovia and its affiliates have pur-
chased approximately $552 million of First Union common stock in the open mar-
ket. Wachovia and its affiliates may continue to purchase First Union common
stock from time to time in the future consistent with applicable legal and
regulatory requirements.

Securities Table 10
- -------------------------------------------------------------------------------
June 30, 2001 (thousands)

Securities available-for-sale at fair value:
U.S. Government and agency......................................... $1,014,203
Mortgage-backed.................................................... 4,201,075
Other.............................................................. 1,061,170
----------
Total available-for-sale.......................................... 6,276,448
Securities held-to-maturity:
U.S. Government and agency......................................... 143,160
Mortgage-backed.................................................... 270,982
State and municipal................................................ 206,050
Other.............................................................. 5,135
----------
Total held-to-maturity............................................ 625,327
----------
Total securities.................................................. $6,901,775
==========

The increase in average other assets from the second and fourth quarters of
2000 as presented on the Taxable Equivalent Rate/Volume Variance Analysis table
was primarily due to the change in the mark-to-market adjustment on securities
classified as available-for-sale. Securities available-for-sale had an average
unrealized gain of $124 million in the second quarter of 2001 compared with av-
erage unrealized losses of $30 million and $159 million, respectively, in the
fourth and second quarters of 2000. An increase in intangible assets resulting
from acquisitions and the unrealized gains on derivative securities qualifying
as hedges accounted for most of the remaining increase.

Average interest-bearing deposits rose $1.386 billion or 3.9 percent from the
second quarter of 2000 and $1.531 billion or 4.3 percent from the fourth quar-
ter of 2000. Excluding the effects of acquisitions and branch sales in the
third quarter of 2000, average interest-bearing deposits were level with the
second quarter of 2000 although the mix shifted from certificates of deposit,
in particular large denominations, toward lower rate savings and money market
accounts. Wachovia's Premiere money market deposit product experienced strong
growth in particular much of which came from maturing certificates of deposit.

Wachovia utilizes a wide variety of wholesale funding sources including large
denomination certificates of deposit, foreign deposits, repurchase agreements,
federal funds, Federal Home Loan Bank advances, trust preferred securities,
bank notes and senior and subordinated debt to fund the balance sheet. The mix
and characteristics of wholesale funding are determined based on interest rate
risk management, liquidity needs and available pricing. Subordinated debt and
trust preferred securities are used for capital management purposes since they
qualify for inclusion in Tier II and Tier I capital, respectively, for risk
based capital purposes.

Liquidity Management

Wachovia manages liquidity at both the parent and subsidiary levels through ac-
tive management of the balance sheet. Parent company liquidity comes from
short-term investments that can be sold immediately, the ability to issue debt
and equity securities, and from dividends and interest income from subsidiar-
ies. At June 30, 2001, Wachovia Corporation had $1.222 billion in interest-
bearing balances with Wachovia Bank, N.A. ("Wachovia Bank"), and $750 million
available for issuance as senior or subordinate debt securities under existing
shelf registrations filed with the Securities and Exchange Commission. At July
1, 2001, $852 million was available from Wachovia's bank subsidiaries to pay
dividends to Wachovia Corporation without prior regulatory approval. As a back-
up liquidity facility for commercial paper, Wachovia has $395 million in lines
of credit from unaffiliated banks. No borrowings have occurred under these
lines.

Wachovia Corporation's senior notes are rated AA- by Fitch, A1 by Moody's and
A+ by Standard & Poor's, and its subordinated notes are rated A+ by Fitch, A2
by Moody's and A by Standard & Poor's. The subordinated debt securities qualify
for inclusion in Tier II capital under risk-based capital guidelines. Capital
securities, also classified as part of other long-term debt, totaled $997 mil-
lion at June 30, 2001. The capital securities are rated A+ by Fitch, a1 by
Moody's and A by Standard & Poor's and qualify as Tier I capital under risk-
based capital guidelines.

Through its global bank note program, Wachovia Bank is authorized to issue up
to $17.0 billion of bank notes. The global bank note program consists of issu-
ances with original maturities beginning at seven days. Bank notes with origi-
nal maturities of one year or less are included in other short-term borrowed
funds, and bank notes with original maturities greater than one year are con-
sidered medium-term in nature and are classified as long-term debt. Under the
existing offering circular, Wachovia Bank can have outstanding up to $10 bil-
lion of notes

at any one time with original maturities from 7 to 270 days. Wachovia Bank may
issue up to an aggregate of $8 billion of notes with maturities of more than
270 days. At June 30, 2001, Wachovia Bank had approximately $6.4 billion of the
notes with maturities of more than 270 days available under the existing autho-
rization. There were no short-term bank notes outstanding as of June 30, 2001.
Medium-term bank notes were $1.291 billion on the same date, with an average
cost of 4.89 percent and an average maturity of 7.3 years. Short-term issues
under the global bank note program are rated F1+ by Fitch, P-1 by Moody's and
A-1+ by Standard & Poor's, while medium-term issues are rated AA- by Fitch, Aa3
by Moody's and AA- by Standard & Poor's.

Allowance for Loan Losses Table 11
- --------------------------------------------------------------------------------
(thousands)

Six Months Ended
2001 2000 June 30
------------------ ---------------------------- ------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter 2001 2000
-------- -------- -------- -------- -------- -------- --------

Summary of Transactions
Balance at beginning of period.......... $698,676 $667,654 $644,555 $644,445 $440,749 $667,654 $436,680
Additions from acquisitions............. -- 25,739 -- -- 3,289 25,739 7,017
Provision for loan losses............... 143,809 66,564 68,536 77,483 223,169 210,373 244,212
Deduct net loan losses:
Loans charged off:
Commercial............................ 66,699 41,689 35,871 70,573 14,991 108,388 26,271
Other revolving credit................ 4,704 3,336 2,901 3,013 2,417 8,040 4,946
Other retail.......................... 12,897 13,282 9,325 8,437 8,124 26,179 17,999
Real estate........................... 10,032 9,242 2,513 887 1,612 19,274 2,832
Lease financing....................... 2,297 834 262 226 404 3,131 972
Foreign............................... 37 -- -- -- -- 37 --
-------- -------- -------- -------- -------- -------- --------
Total................................. 96,666 68,383 50,872 83,136 27,548 165,049 53,020
Recoveries:
Commercial............................ 6,280 1,925 2,047 1,673 583 8,205 1,204
Other revolving credit................ 673 534 448 494 662 1,207 1,328
Other retail.......................... 3,066 2,937 2,072 2,441 3,018 6,003 5,584
Real estate........................... 823 1,625 794 1,033 402 2,448 1,188
Lease financing....................... 107 81 74 122 121 188 252
Foreign............................... -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total................................. 10,949 7,102 5,435 5,763 4,786 18,051 9,556
-------- -------- -------- -------- -------- -------- --------
Net loan losses........................ 85,717 61,281 45,437 77,373 22,762 146,998 43,464
-------- -------- -------- -------- -------- -------- --------
Balance at end of period................ $756,768 $698,676 $667,654 $644,555 $644,445 $756,768 $644,445
======== ======== ======== ======== ======== ======== ========
Net Loan Losses (Recoveries) by Category
Commercial.............................. $ 60,419 $ 39,764 $ 33,824 $ 68,900 $ 14,408 $100,183 $ 25,067
Other revolving credit.................. 4,031 2,802 2,453 2,519 1,755 6,833 3,618
Other retail............................ 9,831 10,345 7,253 5,996 5,106 20,176 12,415
Real estate............................. 9,209 7,617 1,719 (146) 1,210 16,826 1,644
Lease financing......................... 2,190 753 188 104 283 2,943 720
Foreign................................. 37 -- -- -- -- 37 --
-------- -------- -------- -------- -------- -------- --------
Total................................. $ 85,717 $ 61,281 $ 45,437 $ 77,373 $ 22,762 $146,998 $ 43,464
======== ======== ======== ======== ======== ======== ========
Annualized Net Loan Losses
(Recoveries) to Average Loans by
Category
Commercial.............................. 1.44% .89% .75% 1.54% .32% 1.15% .28%
Other revolving credit.................. 1.69 1.23 1.14 1.21 .88 1.47 .94
Other retail............................ .64 .72 .53 .45 .40 .68 .49
Real estate............................. .15 .14 .03 -- .03 .14 .02
Lease financing......................... .31 .11 .03 .02 .04 .21 .05
Foreign................................. .01 -- -- -- -- .01 --
Total loans............................. .66 .48 .36 .64 .19 .57 .19
Period-end allowance to outstanding
loans.................................. 1.45 1.33 1.32 1.29 1.33 1.45 1.33

Allowance for Loan Losses

Wachovia's allowance for loan losses is maintained at a level adequate to ab-
sorb probable losses inherent in the loan portfolio at the date of the finan-
cial statements. At June 30, 2001, the allowance for loan losses assigned to
continuing operations was $757 million or 1.45 percent of outstanding loans
compared with $668 million or 1.32 percent and $644 million or 1.33 percent at
December 31, 2000 and June 30, 2000, respectively. The allowance for loan
losses varied over the periods presented due to changes in the portfolio's risk
profile. Compared with a year ago, the increase in the allowance at June 30,
2001 was due to a rise in the level of nonperforming loans and downward migra-
tion on Wachovia's internal loan risk grades. External factors such as lower
corporate earnings growth, rising default rates and an increase in the ratio of
credit rating downgrades to upgrades indicate rising risk in the corporate
lending environment.

Nonperforming loans decreased $120 million from December 31, 2000, but were up
$96 million from June 30, 2000. The level has fallen from December 31, 2000,
primarily from the sale or charge-off of nonperforming loans. Management has
taken aggressive action to recognize losses where appropriate and to limit ex-
posure through the sale of nonperforming loans where market pricing was favora-
ble. While the level of nonperforming loans has steadily declined over the last
two quarters, other factors such as continued softening in reported corporate
earnings, a general lowering of future earnings expectations by public compa-
nies and continued announcements concerning layoffs, led to the increase in the
allowance during the second quarter. Management continues to monitor the loan
portfolio and is taking appropriate action to proactively reduce credit expo-
sure. Early in the year, Wachovia formed a workout group comprised of approxi-
mately 30 highly experienced bankers that has been successful in trimming expo-
sure to problem loans.

Nonperforming Assets and Contractually Past Due Loans Table 12
- --------------------------------------------------------------------------------
(thousands)

Jun. 30 Mar. 31 Dec. 31 Sept. 30 Jun. 30
2001 2001 2000 2000 2000
-------- -------- -------- -------- --------

Nonperforming Assets
Nonaccrual loans............ $378,554 $408,646 $498,592 $443,620 $282,333
Restructured loans.......... -- -- -- -- --
-------- -------- -------- -------- --------
Total nonperforming
loans.................... 378,554 408,646 498,592 443,620 282,333
Foreclosed property:
Foreclosed real estate..... 15,710 18,712 13,855 12,794 12,946
Less valuation allowance... 1,788 1,960 2,210 2,429 2,867
Other foreclosed assets.... 8,039 10,148 9,733 6,501 5,060
-------- -------- -------- -------- --------
Total foreclosed
property................. 21,961 26,900 21,378 16,866 15,139
-------- -------- -------- -------- --------
Total nonperforming
assets................... $400,515 $435,546 $519,970 $460,486 $297,472
======== ======== ======== ======== ========
Nonperforming loans to
period-end loans........... .73% .78% .95% .88% .56%
Nonperforming assets to
period-end loans and
foreclosed property........ .77 .83 .99 .91 .59
Period-end allowance for
loan losses times
nonperforming loans........ 2.00x 1.85x 1.40x 1.51x 2.28x
Period-end allowance for
loan losses times
nonperforming assets....... 1.89 1.74 1.34 1.45 2.17
Contractually Past Due Loans
(accruing loans past due 90
days or more).............. $ 74,176 $ 57,181 $ 75,277 $ 55,621 $ 53,966
======== ======== ======== ======== ========

At June 30, 2001, Wachovia's nonperforming assets represented .77 percent of
total loans and foreclosed property compared with 1.03 percent and .61 percent
at December 31, 2000 and June 30, 2000, respectively.

The provision for loan losses charged to earnings was an amount sufficient to
position the allowance for loan losses at the appropriate level as described
above. For the second quarter the provision for loan losses was $144 million
compared with $223 million for the same period of 2000. In both periods the
provision for loan losses increased the allowance for loan losses in response
to deteriorating economic conditions. In the second quarters of 2001 and 2000,
Wachovia increased the allowance for loan losses $58 million and $200 million,
respectively, through charges to earnings. Net charge-offs were $86 million or
.66 percent of average loans outstanding in the second quarter of 2001 compared
with $23 million or .19 percent of average loans outstanding a year earlier.
Year to date, the provision for loan losses was $210 million compared with $244
million a year earlier.

Looking forward, management remains watchful of credit quality issues and some
further increase in nonperforming loans could be experienced over the next few
quarters.

Noninterest Income

Other operating revenue, which excludes securities transactions, grew $28 mil-
lion or 7.3 percent for the second quarter and $64 million or 8.3 percent for
the first six months from the respective year earlier periods. Growth occurred
in most categories except investment fees which continue to be suppressed by
market conditions. Adjusting for the effects of acquisitions, operating revenue
grew approximately 5 percent from second quarter 2000.

Noninterest Income and Expense Table 13
- --------------------------------------------------------------------------------
(thousands)

Six Months Ended
2001 2000 June 30
----------------- ---------------------------- -----------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter 2001 2000
-------- -------- -------- -------- -------- -------- --------

Noninterest Income
Service charges on
deposit accounts....... $115,157 $104,282 $106,655 $106,765 $104,380 $219,439 $205,191
Fees for trust
services............... 57,923 57,090 57,417 56,636 54,189 115,013 105,423
Investment fees......... 75,609 75,864 76,521 80,065 81,439 151,473 178,209
Capital markets income.. 45,581 48,166 40,115 40,092 45,014 93,747 89,800
Electronic banking...... 29,300 26,770 27,029 26,254 26,153 56,070 49,549
Mortgage fees........... 14,955 8,368 7,082 7,373 5,921 23,323 10,922
Bankers' acceptance and
letter of credit fees.. 14,803 13,547 14,948 15,102 13,671 28,350 25,268
Other service charges
and fees............... 28,293 25,326 25,723 20,253 17,915 53,619 37,054
Other income............ 29,504 62,647 25,872 67,454 34,533 92,151 68,039
-------- -------- -------- -------- -------- -------- --------
Total other operating
revenue............... 411,125 422,060 381,362 419,994 383,215 833,185 769,455
Securities gains
(losses)............... 97,180 9,076 (480) (163) 59 106,256 226
-------- -------- -------- -------- -------- -------- --------
Total.................. $508,305 $431,136 $380,882 $419,831 $383,274 $939,441 $769,681
======== ======== ======== ======== ======== ======== ========

Service charges on deposit accounts grew $11 million or 10.3 percent from the
second quarter of 2000 and $14 million or 6.9 percent year to date. The acqui-
sition of Republic Security Bank accounted for approximately 40 percent of the
increase over the second quarter of 2000. The remaining increase is due to
higher commercial analysis fees reflecting improved pricing and an increase in
returned check charges. The increase in returned check charges is primarily due
to a higher occurrence rate although improvement in the collection rate also
contributed.

Trust fees were up $4 million or 6.9 percent from the second quarter of 2000
and were up $10 million or 9.1 percent from the first six months of 2000 de-
spite softening market conditions that eroded asset values. Due to the use of
tiered pricing structures, a reduction in the value of assets under management
does not proportionately reduce fee income derived from the value of managed
assets. Successful sales efforts, particularly with institutional customers,
offset the reduction in fees caused by declining asset values.

Investment fees were down $6 million or 7.2 percent from the second quarter of
2000 and were down $27 million or 15.0 percent from the first half of 2000. The
equity markets and trading activity reached record levels in the first quarter
of 2000 and have since retreated leaving mutual fund income and equity trading
commissions down from a year ago. A sharp increase in annuity fees in the sec-
ond quarter partially offset the decrease in mutual fund income and equity
trading commissions.

Capital markets income was mostly flat with the second quarter of 2000 but was
up $4 million or 4.4 percent over the first half of 2000. Increases in deriva-
tive income and asset backed finance fees offset declines in loan syndication
and foreign exchange fees.

Electronic banking fees were up $3 million or 12.0 percent for the quarter and
$7 million or 13.2 percent for the first six months from the same respective
periods a year ago. Higher debit card transaction volume pushed interchange
fees higher. Mortgage fees were also up $9 million or over 150 percent from the
second quarter of 2000 and were up $12 million or 113.5 percent due to increas-
ing demand for fixed rate mortgages in the lower rate environment. Wachovia
originates and sells fixed rate mortgages and receives a fee for the sale of
the servicing rights.

Other service charges and fees increased by $10 million or 57.9 percent from
the second quarter of 2000. For the first six months, other service charges and
fees increased $17 million or 44.7 percent from a year ago. Most of the in-
crease was in insurance premiums and commissions reflecting core business
growth and the acquisitions of DavisBaldwin in the fourth quarter of 2000 and
Hamilton Dorsey Alston Company on May 1. The acquisitions had the greatest im-
pact on property and casualty commissions that were up over $4 million for the
quarter and almost $8 million year to date from the comparable 2000 periods.

Other income decreased $5 million from the second quarter of 2000 but increased
$24 million from the first half of 2000. The decrease from the second quarter
of 2000 is primarily due to amounts paid to third parties in the first and sec-
ond quarters of 2001 to assume Wachovia's liability for unfunded commitments
related to certain customers. The first quarter of 2001 also included the rec-
ognition of a $42 million gain on Wachovia's investment in Star Systems, Inc.

Included in noninterest income for the second quarter and first six months of
2001 were securities gains of $97 million and $106 million, respectively, com-
pared with $59 thousand and $226 thousand, respectively, for the same periods
of 2000. During the second quarter of 2001, Wachovia took the opportunity to
sell securities and recognize gains caused by declining interest rates.

Noninterest Expense

Noninterest expense for continuing operations was up $23 million or 4.1 per-
cent from the second quarter of 2000 and up $13 million or 1.2 percent from
the first half of 2000. Acquisitions and nonrecurring charges affect compara-
bility between periods. Adjusting for those items, noninterest expense was
down slightly from a year ago reflecting successful cost control efforts. Non-
recurring expenses include restructuring charges, merger-related expenses, and
a litigation settlement charge. The restructuring charge recorded in the first
quarter of 2001 is explained in more detail on page 29. The litigation settle-
ment charge recorded in the first quarter of 2000 resulted from an agreement
reached with the U. S. Department of Labor to settle litigation stemming from
a lawsuit begun against South Carolina National Bank (a predecessor of Wacho-
via Bank) in May 1991.

Noninterest Income and Expense Table 14
- -------------------------------------------------------------------------------
(thousands)

Six Months Ended
2001 2000 June 30
------------------ ---------------------------- ----------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter 2001 2000
-------- -------- -------- -------- -------- ---------- ----------

Noninterest Expense
Salaries................ $283,179 $268,816 $230,394 $264,491 $270,569 $ 551,995 $ 546,262
Employee benefits....... 55,420 52,810 50,600 48,381 50,916 108,230 104,675
-------- -------- -------- -------- -------- ---------- ----------
Total personnel
expense............... 338,599 321,626 280,994 312,872 321,485 660,225 650,937
Net occupancy expense... 42,088 39,915 38,571 38,986 39,347 82,003 77,548
Equipment expense....... 43,250 44,093 46,409 44,235 44,806 87,343 92,928
Postage and delivery.... 11,081 10,806 10,781 11,022 11,155 21,887 22,717
Outside data processing,
programming and
software............... 30,173 28,685 28,950 24,963 23,538 58,858 48,450
Stationery and
supplies............... 9,650 9,145 8,769 8,914 9,494 18,795 18,218
Advertising and sales
promotion.............. 7,232 7,897 11,591 9,075 8,761 15,129 16,574
Professional services... 13,771 16,107 23,613 18,342 16,964 29,878 28,854
Travel and business
promotion.............. 9,895 9,327 10,378 9,352 10,982 19,222 20,367
Telecommunications...... 14,976 14,351 14,145 13,959 14,128 29,327 27,531
Amortization of
intangible assets...... 18,127 15,226 13,923 14,304 13,957 33,353 27,587
Foreclosed property
expense -- net of
income................. 834 985 109 (349) (220) 1,819 (2,942)
Other expense........... 34,285 39,028 33,717 35,374 39,034 73,313 76,887
-------- -------- -------- -------- -------- ---------- ----------
Total operating
expense............... 573,961 557,191 521,950 541,049 553,431 1,131,152 1,105,656
Merger-related charges.. 11,670 -- -- 11,928 8,872 11,670 17,030
Litigation settlement
charge................. -- -- -- -- -- -- 20,000
Restructuring charge.... -- 13,152 19,543 87,944 -- 13,152 --
-------- -------- -------- -------- -------- ---------- ----------
Total.................. $585,631 $570,343 $541,493 $640,921 $562,303 $1,155,974 $1,142,686
======== ======== ======== ======== ======== ========== ==========
Overhead ratio*......... 59.5% 58.6% 58.2% 66.2% 60.0% 59.1% 61.5%
Operating overhead
ratio.................. 58.3 57.2 56.1 55.9 59.0 57.8 59.5

* Noninterest expense as a percentage of taxable equivalent net interest in-
come and total other operating revenue.

Total personnel expense was up $17 million or 5.3 percent and $9 million or
1.4 percent from the second quarter and first six months of 2000, respective-
ly. Adjusted for acquisitions, the increase in personnel expense is approxi-
mately 1 percent reflecting the success of Wachovia's expense control
initiatives. At June 30, 2001, Wachovia had 20,725 full time equivalent em-
ployees, including approximately 890 added with the acquisitions of Republic
Security Bank and Hamilton Dorsey Alston Company, compared with 21,509 a year
earlier.

The combined categories of occupancy and equipment expense were mostly level
with a year ago when comparing both the second quarter and the first six
months despite additional expense added by acquisitions. This reflects manage-
ment's expense control efforts, and lower depreciation of personal computer
and peripheral equipment, adjusted for lower staffing levels.

Professional services expense was down $3 million or 18.8 percent from the sec-
ond quarter of 2000 but up $1 million from the first half of 2000 primarily due
to the timing of projects. Several initiatives were completed during the first
quarter of 2001 and other projects have been suspended.

Amortization of intangible assets rose from prior year levels primarily as a
result of intangibles associated with the acquisition of Republic Security
Bank.

The other major expense categories show little change from their level a year
ago in comparing both the quarter and the first half of the year.

On August 28, 2000, Wachovia announced the realignment of resources that called
for the elimination of 1,800 positions. In connection with the restructuring
plan, Wachovia incurred charges of $88 million and $20 million, respectively,
during the third and fourth quarters of 2000. The remaining charge of $13 mil-
lion to complete the project was incurred during the first quarter of 2001. The
amounts expensed and paid during the first half of 2001 are reported below.

Restructuring Charge Table 15
- --------------------------------------------------------------------------------
(thousands)

Balance at Charge to Utilized During Balance at
Dec. 31, 2000 Earnings 2001 June 30, 2001
------------- --------- --------------- -------------

Severance and personnel-
related costs.......... $38,233 $ 5,226 $29,111 $14,348
Occupancy and other
costs.................. 1,384 7,926 9,240 70
------- ------- ------- -------
Total................... $39,617 $13,152 $38,351 $14,418
======= ======= ======= =======

Severance and personnel related costs include severance payments to terminated
employees as well as benefits including pension, medical and job transition as-
sistance. Occupancy and other costs represent asset impairment charges and
other facility exit costs associated with the project. Included in occupancy
and other costs were non-cash items of approximately $7 million.

Income Taxes Table 16
- --------------------------------------------------------------------------------
(thousands)

Three Months Six Months Ended
Ended June 30 June 30
------------------ ------------------
2001 2000 2001 2000
-------- -------- -------- --------

Income before income taxes............ $344,208 $123,017 $681,336 $453,541
======== ======== ======== ========
Federal income taxes at statutory
rate................................. $120,472 $ 50,056 $238,468 $158,739
State and local income taxes--net of
federal benefit...................... 5,480 428 12,930 7,493
Effect of tax-exempt securities
interest and other income............ (11,537) (11,453) (23,113) (22,723)
Other items........................... 6,615 5,256 12,922 9,334
-------- -------- -------- --------
Total tax expense................... $121,030 $ 44,287 $241,207 $152,843
======== ======== ======== ========
Current:
Federal.............................. $ 73,049 $ 21,226 $102,093 $ 42,831
Foreign.............................. 406 364 1,002 700
State and local...................... 10,383 6,400 17,911 13,092
-------- -------- -------- --------
Total............................... 83,838 27,990 121,006 56,623
Deferred:
Federal.............................. 37,196 22,038 118,221 97,784
State and local...................... (4) (5,741) 1,980 (1,564)
-------- -------- -------- --------
Total............................... 37,192 16,297 120,201 96,220
-------- -------- -------- --------
Total tax expense................... $121,030 $ 44,287 $241,207 $152,843
======== ======== ======== ========

Income Taxes

Applicable income taxes for continuing operations for the second quarter of
2001 increased $77 million from the second quarter of 2000 and increased $88
million from the first half of 2000 reflecting a higher level of pretax earn-
ings. Wachovia's effective tax rate is higher than 2000 in comparing both the
second quarter and first half of the year. The increase is caused by tax exempt
income accounting for a proportionately larger share of pretax income in 2000.
The current year also included a larger amount of nondeductible intangible am-
ortization that resulted from recent acquisitions.

New Accounting Standards

Effective January 1, 2001, Wachovia adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging Activi-
ties" (FASB 133), which established accounting and reporting standards for de-
rivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. All derivatives, whether designated
in hedging relationships or not, are required to be recorded on the balance
sheet at fair value. If the derivative is designated as a fair value hedge, the
changes in the fair value of the derivative and of the hedged item attributable
to the risk being hedged are recognized in earnings. If the derivative is des-
ignated as a cash flow hedge, the effective portion of the changes in the fair
value of the derivative are recorded in other comprehensive income and are rec-
ognized in the income statement when the hedged item affects earnings. Ineffec-
tive portions of changes in the fair value of cash flow hedges are recognized
in earnings. If the derivative is not designated as a hedging instrument, the
changes in fair value of the derivative are recorded in income. The adoption of
FASB 133 did not have a material impact on Wachovia's financial position or re-
sults of operations.

In September 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities" (FASB 140) which re-
places FASB Statement No. 125. FASB 140 revises the standards for accounting
for securitizations and other transfers of financial assets and collateral and
requires certain additional disclosures regarding these activities. The state-
ment is effective for transfers and servicing of financial assets or extin-
guishments of liabilities that occur after March 31, 2001. The statement was
effective for recognition and reclassification of collateral and for disclo-
sures relating to securitization transactions and collateral for fiscal years
ending after December 15, 2000. Adoption did not result in a material financial
impact.

In July 2001, the Financial Accounting Standards Board issued Statement of Fi-
nancial Accounting Standards No. 141, "Business Combinations" (FASB 141) which
supercedes Accounting Principles Board Opinion No. 16 "Business Combinations"
and FASB 38 "Accounting for Preacquisition Contingencies of Purchased Enter-
prises". FASB 141 changes the existing accounting treatment for business combi-
nations to allow only the purchase method. The statement applies to all busi-
ness combinations initiated after June 30, 2001. The statement also applies to
all business combinations accounted for using the purchase method for which the
date of acquisition is July 1, 2001, or later. Adoption of this statement is
not expected to have a material impact on Wachovia's results of operations or
financial position.

In July 2001, the Financial Accounting Standards Board issued Statement of Fi-
nancial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
(FASB 142) which supercedes Accounting Principles Board Opinion No. 17 "Intan-
gible Assets". FASB 142 addresses how intangible assets that are acquired indi-
vidually or with a group of other assets (but not those acquired in a business
combination) should be accounted for in

financial statements upon their acquisition. FASB 142 also addresses how good-
will and other intangible assets should be accounted for after they have been
initially recognized in the financial statements. The most significant change
from current accounting standards is that goodwill will no longer be amortized
but will instead be tested periodically for impairment. Impairment losses for
goodwill and indefinite-lived intangible assets that arise due to the initial
application of FASB 142 are to be reported as resulting from a change in ac-
counting principle. FASB 142 is effective for Wachovia beginning in the first
quarter of 2002 and is required to be applied to all goodwill and intangibles
recognized in the financial statements at that date. Adoption is not expected
to have a material impact on results of operations or financial position.

SHAREHOLDERS' EQUITY AND CAPITAL RATIOS

Shareholders' equity at June 30, 2001 was $6.455 billion, up $519 million or
8.8 percent from $5.936 billion one year earlier and up $171 million or 2.7
percent from December 31, 2000. Included in shareholders' equity at the end of
the second quarter of 2001 was $6 million, net of tax, of accumulated other
comprehensive income comprised of $22 million in unrealized gains on securi-
ties available-for sale, $15 million minimum pension liability and $572 thou-
sand in unrealized losses on derivatives qualifying as cash flow hedges. This
compared with accumulated other comprehensive losses of $80 million, net of
tax, one year earlier and accumulated other comprehensive income of $30 mil-
lion at December 31, 2000 that were entirely comprised of unrealized losses
and gains on securities available-for-sale. The change in the value of securi-
ties available-for-sale is primarily due to the decline in interest rates and
securities sales executed during the second quarter of 2001.

Wachovia had three share repurchase authorizations outstanding during the
quarter. Wachovia may repurchase up to 8 million shares of its common stock
under a January 28, 2000 authorization effective through January 25, 2002. Wa-
chovia was also authorized to repurchase shares to offset the approximately 7
million shares issued to acquire Republic Security Financial Corporation and
Hamilton Dorsey Alston Company. During the second quarter of 2001, Wachovia
Corporation repurchased 8 million shares that completed both acquisition-re-
lated repurchase authorizations. As of June 30, 2001, approximately 6 million
shares remain available for repurchase under the January 28, 2000 authoriza-
tion. Management will continue to work within the guidelines of its share re-
purchase authorizations while assessing the best deployment of Wachovia's cap-
ital.

At its July 27, 2001 meeting, the Board of Directors declared a third quarter
dividend of $.60 per share, payable September 4 to shareholders of record as
of August 10. The dividend is equal to the amount paid in the same quarter of
2000.

Intangible assets at June 30, 2001 totaled $1,317 billion, consisting of
$1,195 million of goodwill, $108 million of deposit base intangibles and $14
million of other intangibles. The acquisitions of Republic Security Financial
Corporation and Hamilton Dorsey Alston Company added intangibles of approxi-
mately $265 million and $40 million, respectively. Intangible assets at the
end of the second quarter of 2000 were $1.008 billion, with $935 million of
goodwill and $73 million of deposit base intangibles.

Regulatory agencies divide capital into Tier I (consisting of shareholders'
equity and certain cumulative preferred stock instruments less ineligible in-
tangible assets) and Tier II (consisting of the allowable portion of the re-
serve for loan losses and certain long-term debt) and measure capital adequacy
by applying both capital levels to a banking company's risk-adjusted assets
and off-balance sheet items. Regulatory requirements presently specify that
Tier I capital should exclude the unrealized gain or loss, net of tax, on se-
curities available-for-sale. In addition to these capital ratios, regulatory
agencies have established a Tier I leverage ratio which measures Tier I capi-
tal to average assets less ineligible intangible assets.

Capital Components and Ratios Table 17
- --------------------------------------------------------------------------------
(thousands)

2001 2000
------------------------ -------------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
----------- ----------- ----------- ----------- -----------

Tier I capital:
Common shareholders'
equity................ $ 6,455,475 $ 6,864,856 $ 6,284,539 $ 6,090,164 $ 5,936,044
Trust capital
securities............ 997,307 997,213 997,119 997,025 996,932
Less ineligible
intangible assets..... 1,347,694 1,316,300 1,071,679 1,040,066 1,057,314
Unrealized (gains)
losses on securities
available-for-sale --
net of tax........... (6,145) (74,602) (30,312) 29,780 77,233
----------- ----------- ----------- ----------- -----------
Total Tier I capital.. 6,098,943 6,471,167 6,179,667 6,076,903 5,952,895
Tier II capital:
Allowable allowance for
loan losses........... 906,674 851,082 822,560 799,461 799,351
Allowable long-term
debt.................. 2,304,548 2,464,279 2,463,031 2,542,833 2,242,780
----------- ----------- ----------- ----------- -----------
Tier II capital
additions............ 3,211,222 3,315,361 3,285,591 3,342,294 3,042,131
----------- ----------- ----------- ----------- -----------
Total capital......... $ 9,310,165 $ 9,786,528 $ 9,465,258 $ 9,419,197 $ 8,995,026
=========== =========== =========== =========== ===========
Risk-adjusted assets.... $83,020,443 $82,948,338 $81,856,272 $81,073,761 $80,796,945
Quarterly average
assets*................ $73,560,023 $72,392,777 $70,803,380 $68,773,165 $68,559,502
Risk-based capital
ratios:
Tier I capital......... 7.35% 7.80% 7.55% 7.50% 7.37%
Total capital.......... 11.21 11.80 11.56 11.62 11.13
Tier I leverage ratio... 8.29 8.94 8.73 8.84 8.68

* Excludes ineligible intangible assets and average unrealized gains and losses
on securities available-for-sale, net of tax.

Regulatory guidelines require a minimum of total capital to risk-adjusted as-
sets ratio of 8 percent with at least one-half consisting of tangible common
shareholders' equity and a minimum Tier I leverage ratio of 3 percent. Banks
that meet or exceed a Tier I ratio of 6 percent, a total capital ratio of 10
percent and a Tier I leverage ratio of 5 percent are considered well capital-
ized by regulatory standards. It is Wachovia's policy that it and its banking
subsidiaries be well capitalized at all times.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk and Asset/Liability Management

Market risk is the risk of loss due to adverse changes in instrument values or
earnings fluctuation resulting from changes in market factors including changes
in interest rates, foreign exchange rates, commodity prices and other market
variables such as equity price risk. Wachovia primarily is exposed to interest
rate risk with immaterial risk exposure to changes in foreign exchange rates
and equity prices in the nontrading portfolios.

Trading Market Risk

Trading market risk is the risk to net income from changes in the fair value of
assets and liabilities and off-balance sheet instruments that are marked-to-
market through the income statement. The earnings risk due to changes in fair
value in the trading portfolios is limited by the short-term holding periods of
some of the portfolios, entering into offsetting trades with market
counterparties, establishing and monitoring market risk limits by portfolio,
and utilizing various hedging techniques.

Wachovia uses a value-at-risk (VaR) methodology to gauge potential losses in
various trading portfolios due to changes in interest rates. The VaR estimate
represents the maximum expected loss in fair value of a trading portfolio over
a one day time horizon, given a 99 percent confidence level. In other words,
there is about a 1 percent chance, given historical volatility of interest
rates, that a loss greater than the VaR estimate will occur by the end of the
next day.

At June 30, 2001, the combined VaR exposure was $80 thousand representing .02
percent of the combined trading portfolio value of $451 million. The combined
average VaR exposure for the second quarter of 2001 was $64 thousand represent-
ing .02 percent of the combined average trading portfolio value of $419 mil-
lion. These VaR numbers are for the combined fixed income and equity trading
portfolios.

Nontrading Market Risk

Nontrading market risk is the risk to net income and equity capital from
changes in interest rates on asset, liability and off-balance sheet portfolios
other than trading. The risk is driven by potential mismatches resulting from
timing differences in the repricing of assets, liabilities and off-balance
sheet instruments, and potential exercise of explicit and embedded options.
There also is net income risk from changes in market rate relationships known
as basis risk.

Management believes that nontrading interest rate risk is best measured by sim-
ulation modeling which calculates expected net income based on projected inter-
est-earning assets, interest-bearing liabilities, off-balance sheet financial
instruments, other income and other expense. The model projections are based
upon historical trends and management's expectations of balance sheet growth
patterns, spreads to market rates, historical market rate relationships, pre-
payment behavior, current and expected product offerings, sales activity, and
expected exercise of explicit and embedded options. In order to discern risk
levels preset in the balance sheet beyond the 24 month time horizon used in
simulation modeling, Wachovia utilizes a present value methodology commonly re-
ferred to as Economic Value of Equity or EVE.

The policy guideline limit for net income (after-tax changes in net interest
income) simulation is a negative impact to net income of 7.5 percent for the up
or down 200 basis point ramp scenarios when compared with the flat rate scenar-
io. Management has generally maintained a risk position well within the policy
guideline level. The model indicated the impact of a 200 basis point gradual
rise in rates over the next 12 months would cause approximately a .11 percent
decrease in net income at June 30, 2001 versus a .64 percent increase one year
earlier. A gradual decrease in rates over the next 12 months would cause ap-
proximately a .32 percent increase in net income as of June 30, 2001 compared
with a .68 percent decrease at June 30, 2000. Wachovia runs additional scena-
rios beyond the standard shock and ramp scenarios, including yield curve steep-
ening, flattening and inversion scenarios. Various sensitivity analyses are
performed on a regular basis to segregate interest rate risk into separate com-
ponents and understand the risk attributable to prepayments, caps and floors,
and other options. Extensive assumptions testing is performed to understand the
degree of impact from changing key assumptions such as the speed of prepay-
ments, the interest rate elasticity of core deposit rates and faster- or slow-
er-growing balance sheets.

PART II -- OTHER INFORMATION

Item 1. Legal Proceedings

Certain State Court Lawsuits related to the First Union/Wachovia Merger. As
referenced in Wachovia's quarterly report filed on form 10-Q for the quarter
ended March 31, 2001 (as amended on June 26, 2001), in May 2001, two individual
stockholders of Wachovia, purporting to represent a class of holders of Wacho-
via common stock, filed putative Class Action Complaints against Wachovia and
the Wachovia directors, alleging that the Wachovia directors breached their fi-
duciary duties by entering into the merger agreement with First Union Corpora-
tion. The first of these actions, captioned Bennett v. Baker, et al., was filed
in North Carolina Superior Court, Forsyth County, and the second of these ac-
tions, captioned Leser v. Wachovia, et al., was filed in North Carolina Supe-
rior Court, Guilford County. Subsequently, in May and June 2001, five addi-
tional putative Class Action Complaints were filed by individual stockholders
of Wachovia, in each case purporting to represent a class of holders of Wacho-
via common stock and making substantially similar allegations, including:
Heaney v. Wachovia, et al., filed in North Carolina Superior Court, Forsyth
County; Wachsman v. Wachovia, et al., filed in North Carolina Superior Court,
Forsyth County; Rosenberg v. Wachovia, et al., filed in North Carolina Superior
Court, Forsyth County; Drucker v. Wachovia, et al., filed in North Carolina Su-
perior Court, County of Mecklenburg; and Hrobar v. Baker, et al., filed in
North Carolina Superior Court, Wake County. In each of the above shareholder
suits, the plaintiffs seek injunctive relief, unspecified damages and costs and
attorneys' fees.

On May 23, Wachovia joined as a plaintiff a lawsuit filed on May 22, 2001, by
First Union and First Union National Bank against SunTrust, captioned First
Union Corporation and First Union National Bank v. SunTrust Banks, Inc., in
North Carolina Superior Court, County of Mecklenburg. The complaint, as amend-
ed, asserts claims by First Union for unfair trade practices, and tortious in-
terference with prospective economic advantage, asserts a claim by First Union,
First Union National Bank and Wachovia for a declaratory judgment that the
stock option agreements are valid and fully enforceable and asserts a separate
claim by Wachovia against SunTrust for breach of a confidentiality agreement.
The complaint seeks temporary, preliminary and permanent injunctive relief and
declaratory relief.

On May 23, 2001, SunTrust filed a complaint against First Union, Wachovia and
10 of Wachovia's directors, captioned SunTrust v. Baker, et al., in the Georgia
Superior Court, Fulton County. The complaint asserts claims for breach of fidu-
ciary duty and breach of the duty of loyalty and candor against the Wachovia
directors, and aiding and abetting the breaches of those duties by First Union.
The complaint also asserts a claim for restraint of trade under Georgia Code
section 13-8-2 and the Georgia Constitution. The complaint seeks declaratory
and preliminary and permanent injunctive relief, and costs and attorneys' fees.

On June 1, 2001, Wachovia, First Union and SunTrust entered into an agreement
that all litigation brought by them (other than claims over which the federal
courts have exclusive jurisdiction) would be moved to the North Carolina Busi-
ness Court, and that SunTrust would dismiss its Georgia state court action. The
individual shareholder cases filed in North Carolina were also transferred to
the North Carolina Business Court. The shareholder plaintiffs agreed to be
bound by the court's decision on SunTrust's counterclaims. On June 6, SunTrust
filed its answer and filed counterclaims against Wachovia, certain Wachovia di-
rectors and First Union alleging that the Wachovia directors, aided and abetted
by First Union, breached their fiduciary duties by approving the merger agree-
ment and the amended stock option agreements, that those agreements are unrea-
sonable restraints of trade in violation of Georgia law, and seeking a declara-
tion that Wachovia must allow Wachovia shareholders to vote on SunTrust's pro-
posed by-law amendment at the August 3 Wachovia shareholder meeting and seeking

declaratory and injunctive relief. On June 18, the Georgia court dismissed
SunTrust's claim for unreasonable restraint of trade under Georgia law, but al-
lowed SunTrust to proceed with its remaining claims.

On July 20, 2001, the North Carolina Business Court denied all injunctive re-
lief that SunTrust and the shareholder plaintiffs had sought, thereby allowing
the proposed First Union/Wachovia transaction to proceed to a shareholder vote
as scheduled for Wachovia's annual meeting on August 3. The court upheld the
decision made by Wachovia's Board of Directors to approve the merger and deter-
mined that the Wachovia shareholders were fully informed and had an unfettered
opportunity to vote on the proposed merger. The court held as invalid one of
the termination provisions of the merger agreement between Wachovia and First
Union, which did not allow either party to terminate the Merger Agreement if it
is not approved by shareholders.

In Georgia, putative Class Action Complaints were filed against Wachovia, the
Wachovia directors and First Union, by individual stockholders of Wachovia, in
each case purporting to represent a class of holders of Wachovia common stock.
Each of these complaints alleges that the Wachovia directors, aided and abetted
by First Union, breached their fiduciary duties by entering into the merger
agreement with First Union and by failing to consider other alternatives and
seeks injunctive relief, unspecified damages and costs and attorneys' fees. Re-
garding the first of these actions, captioned Wyatt, et al. v. Baker, et al.,
filed on May 16, 2001, in Georgia Superior Court, Fulton County, Wachovia be-
lieves that the complaint is without merit and intends to defend it vigorously.
The second of these actions, captioned Drucker v. Wachovia, et al., filed on
May 23, 2001, in Georgia Superior Court, Fulton County, was dismissed without
prejudice on July 16, 2001.

Certain Federal Court Lawsuits related to the First Union/Wachovia Merger. On
April 20, 2001, as referenced in Wachovia's quarterly report filed on form 10-Q
for the quarter ended March 31, 2001 (as amended on June 26, 2001), an individ-
ual shareholder of Wachovia, purporting to represent a class of Wachovia share-
holders, filed a complaint in the United States District Court for the Middle
District of North Carolina, naming Wachovia, Leslie M. Baker, Jr., and Morris
W. Offit as defendants, captioned Krim v. Wachovia, et al., alleging that the
defendants breached their fiduciary duties to Wachovia's shareholders by enter-
ing into the merger agreement and related agreements with First Union Corpora-
tion. On July 23, plaintiff sought to amend his complaint to allege claims that
the joint proxy statement of First Union and Wachovia contains materially false
and misleading statements in violation of the federal securities laws. On July
26, plaintiff sought an expedited hearing on his demand for injunctive relief
to enjoin the shareholder vote and to force Wachovia to distribute a revised
proxy statement. On August 3 the court denied plaintiff's request for an expe-
dited hearing and for injunctive relief.

On May 22, 2001, SunTrust filed a lawsuit against First Union and Wachovia in
the United States District Court for the Northern District of Georgia, cap-
tioned SunTrust Banks, Inc., v. Wachovia, et al. The complaint asserts claims
that the preliminary joint proxy statement of First Union and Wachovia contains
materially false and misleading statements in violation of the federal securi-
ties laws. The complaint seeks preliminary and permanent injunctive relief and
costs. On May 23, First Union filed an answer to the complaint, denying any li-
ability and asserting affirmative defenses. Also on May 23, SunTrust filed a
putative amended complaint asserting the same claims as in the original com-
plaint, and adding a claim that Wachovia has not complied with federal rules
concerning the record date for a shareholder meeting. The putative amended com-
plaint seeks substantially similar relief as the original complaint. On June 11
and 12, First Union and Wachovia, respectively, filed their answers to the
amended complaint and filed counterclaims against SunTrust asserting that its
preliminary proxy statement contained false and misleading statements in viola-
tion of the federal securities laws. The counterclaims seek preliminary and
permanent injunctive relief.

Wachovia believes that these complaints are without merit and intends to defend
them vigorously.

Shareholder List Litigation. On May 31, 2001, an individual shareholder of Wa-
chovia, who is also the Vice Chairman of SunTrust, filed an action in the North
Carolina Superior Court, Forsyth County, captioned Hoepner v. Wachovia, seeking
to examine the Wachovia shareholder list and certain related shareholder list
materials of Wachovia to enable plaintiff and SunTrust to communicate with
other Wachovia shareholders with respect to SunTrust's solicitation of proxies
urging Wachovia shareholders to vote against the First Union merger. The com-
plaint alleges that Wachovia declined to provide the requested information un-
less plaintiff confirmed that he would not provide such records to SunTrust or
any other person that has not established its entitlement as a qualified share-
holder, or certify SunTrust's status as a qualified shareholder. The complaint
seeks a declaration that Wachovia's failure to permit plaintiff to inspect the
requested documents constitutes a violation of North Carolina common and statu-
tory law, and seeks injunctive relief, and costs and attorneys' fees. This ac-
tion was moved to the North Carolina Business Court. On June 14, that court or-
dered Wachovia to produce its shareholder list to Hoepner or his agent by June
20.

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits -- The exhibits listed on the accompanying Exhibit Index, immedi-
ately following the signature page are filed as part of or incorporated by ref-
erence into this report.

(b) Reports on Form 8-K.

A current report on Form 8-K dated April 9, 2001, was filed with the Secu-
rities and Exchange Commission announcing an agreement for Bank One Corpo-
ration to acquire Wachovia's consumer credit card business, subject to reg-
ulatory approval. The companies also announced a long-term agent bank rela-
tionship under which Wachovia will offer its branded credit cards to retail
customers with servicing provided by First USA, Bank One Corporation's
credit card subsidiary.

A current report on Form 8-K dated April 17, 2001, was filed with the Secu-
rities and Exchange Commission announcing an Agreement and Plan of Merger
with First Union Corporation dated April 15, 2001. Also included were pre-
sentation materials related to the Agreement and Plan of Merger and an an-
nouncement of Wachovia's first quarter 2001 earnings and postponement of
Wachovia's annual shareholders' meeting.

A current report on Form 8-K dated April 19, 2001, was filed with the Secu-
rities and Exchange Commission concerning Wachovia's earnings and results
for the first quarter of 2001.

A current report on Form 8-K dated May 1, 2001, was filed with the Securi-
ties and Exchange Commission announcing Wachovia's intent to resume repur-
chases of its outstanding common stock under existing authorizations by its
board of directors.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the regis-
trant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

WACHOVIA CORPORATION

/s/ Robert S. McCoy, Jr. August 13, 2001
__________________________
By: Robert S. McCoy, Jr.
Vice Chairman,
Chief Financial Officer
and Treasurer

/s/ David L. Gaines August 13, 2001
__________________________
By: David L. Gaines
Comptroller

EXHIBIT INDEX

Exhibit
Number Description
------- -----------

2.1 Agreement and Plan of Merger dated as of April 15, 2001 and amended
and restated between First Union Corporation and Wachovia Corporation
(incorporated by reference to Appendix A of Schedule 14A of Wachovia
Corporation dated June 29, 2001, File No. 1-9021).

2.2 Letter Agreement, dated as of July 20, 2001, between Wachovia and
First Union amending Agreement and Plan of Merger described in Exhibit
2.1 hereto (incorporated by reference to Exhibit 2.1 of Form 8-K of
Wachovia Corporation, dated July 20, 2001, File No. 1-9021).

2.3 Stock Option Agreement, dated as of April 15, 2001 and amended and
restated between First Union Corporation, as grantee, and Wachovia
Corporation, as issuer (incorporated by reference to Appendix B of
Schedule 14A of Wachovia Corporation dated June 29, 2001, File No. 1-
9021).

2.4 Stock Option Agreement, dated as of April 15, 2001 and amended and
restated between Wachovia Corporation, as grantee, and First Union
Corporation, as issuer (incorporated by reference to Appendix C of
Schedule 14A of Wachovia Corporation dated June 29, 2001, File No. 1-
9021).

3.1 Amended and Restated Articles of Incorporation of the registrant
(incorporated by reference to Exhibit 3.1 of Report on Form 10-Q of
Wachovia Corporation for the quarter ended June 30, 1998, File No. 1-
9021).
3.2 Bylaws of the registrant as amended (incorporated by reference to
Exhibit 3.2 of Form S-4 Registration Statement of Wachovia Corporation
dated December 14, 1998, File No. 333-68823).
4 Instruments defining the rights of security holders, including
indentures--Wachovia Corporation hereby agrees to furnish to the
Commission, upon request, a copy of any instruments defining the
rights of security holders that are not required to be filed.
4.1 Articles IV, VII, IX, X and XI of the registrant's Amended and
Restated Articles of Incorporation (included in Exhibit 3.1 hereto).
4.2 Article 1, Section 1.8, and Article 6 of the registrant's Bylaws
(included in Exhibit 3.2 hereto).
4.3 Indenture dated as of May 15, 1986 between South Carolina National
Corporation and Morgan Guaranty Trust Company of New York, as Trustee,
relating to $35,000,000 principal amount of 6 1/2% Convertible
Subordinated Debentures due in 2001 (incorporated by reference to
Exhibit 28 of Form S-3 Registration Statement of South Carolina
National Corporation, File No. 33-7710).
4.4 First Supplemental Indenture dated as of November 26, 1991 by and
among South Carolina National Corporation, Wachovia Corporation and
Morgan Guaranty Trust Company of New York, Trustee, amending the
Indenture described in Exhibit 4.3 hereto (incorporated by reference
to Exhibit 4.10 of Report on Form 10-K of Wachovia Corporation for the
year ended December 31, 1991, File No. 1-9021).
4.5 Indenture dated as of March 15, 1991 between South Carolina National
Corporation and Bankers Trust Company, as Trustee, relating to certain
unsecured subordinated securities (incorporated by reference to
Exhibit 4(a) of Form S-3 Registration Statement of South Carolina
National Corporation, File No. 33-39754).
4.6 First Supplemental Indenture dated as of January 24, 1992 by and among
South Carolina National Corporation, Wachovia Corporation and Bankers
Trust Company, as Trustee, amending the Indenture described in Exhibit
4.5 hereto (incorporated by reference to Exhibit 4.12 of Report on
Form 10-K of Wachovia Corporation for the year ended December 31,
1991, File No. 1-9021).
4.7 Indenture dated as of July 15, 1998 between Wachovia Corporation and
The Chase Manhattan Bank, as Trustee, relating to subordinated debt
securities (incorporated by reference to Exhibit 4(b) of Form S-3
Registration Statement of Wachovia Corporation, File No. 333-59165).
4.8 Indenture dated as of August 15, 1996 between Wachovia Corporation and
The Chase Manhattan Bank, as Trustee, relating to senior debt
securities (incorporated by reference to Exhibit 4(a) of Post-
Effective Amendment No. 1 of Form S-3 Registration Statement of
Wachovia Corporation, File No. 33-6280).
4.9 Indenture between Wachovia Corporation, Wachovia Capital Trust II and
First National Bank of Chicago, as Trustee, relating to Floating-Rate
Junior Subordinated Deferrable Interest Debentures (Junior
Subordinated Debentures) (incorporated by reference to Exhibit 4(c) of
Amendment No. 1 of Form S-3 Registration Statement of Wachovia
Corporation and Wachovia Capital Trust II dated January 22, 1997, File
No. 333-19365).

EXHIBIT INDEX (continued)

4.10 Amended and Restated Declaration of Trust of Wachovia Capital Trust II,
relating to Preferred Securities (incorporated by reference to Exhibit
4(b)(iv) of Amendment No. 1 of Form S-3 Registration Statement of
Wachovia Corporation and Wachovia Capital Trust II dated January 22,
1997, File No. 333-19365).
4.11 Preferred Securities Guarantee Agreement of Wachovia Corporation
(incorporated by reference to Exhibit 4(g) of Amendment No. 1 of Form S-
3 Registration Statement of Wachovia Corporation and Wachovia Capital
Trust II dated January 22, 1997, File No. 333-19365).
4.12 Indenture between Central Fidelity Banks, Inc. and Chemical Bank, as
Trustee, relating to $150,000,000 principal amount of subordinated debt
securities (incorporated by reference to Exhibit 4.1 of Form 8-K of
Central Fidelity Banks, Inc., dated November 18, 1992, File No. 0-8829).
4.13 Indenture between Central Fidelity Banks, Inc., Central Fidelity Capital
Trust I and The Bank of New York, as Trustee, relating to $100,000,000
Floating-Rate Junior Subordinated Debentures (incorporated by reference
to Exhibit 4.1 of Form S-3 Registration Statement of Central Fidelity
Banks, Inc., dated April 23, 1997, File No. 333-28917).
4.14 Amended and Restated Declaration of Trust of Central Fidelity Capital
Trust I (incorporated by reference to Exhibit 4.4 of Form S-3
Registration Statement of Central Fidelity Banks, Inc., dated April 23,
1997, File No. 333-28917).
4.15 Form of New Guarantee Agreement for the benefit of the holders of the
Trust Securities (incorporated by reference to Exhibit 4.6 of Form S-3
Registration Statement of Central Fidelity Banks, Inc., dated as of
April 23, 1997, File No. 333-28917).
4.16 Indenture dated as of June 30, 1997 by and between First Palm Beach
Bancorp, Inc. and The Bank of New York, as Trustee, relating to the
Company's 10.35% Senior Debentures due June 30, 2002 (incorporated by
reference to the Exhibits to Form S-4 Registration Statement filed by
First Palm Beach Bancorp, Inc. on September 11, 1997, Registration No.
333-35431).
4.17 Supplemental Indenture dated as of October 29, 1998 by and among the
Company, First Palm Beach Bancorp, Inc. and The Bank of New York, as
Trustee, relating to the Company's 10.35% Senior Debentures due June 30,
2002 (incorporated by reference to Exhibits to Form 8-K filed on
November 2, 1998, File No. 000-14671).
4.18 Second Supplemental Indenture dated as of December 20, 2000 by and
between Republic Security Financial Corporation and The Bank of New York
as Trustee, relating to the Company's 10.35% Senior Debentures due on
June 30, 2002 (incorporated by reference to Exhibit 4.18 of Report on
Form 10-Q of Wachovia Corporation for the quarter ended March 31, 2001,
File No. 1-9021).
4.19 Third Supplemental Indenture dated as of March 1, 2001 by and between
Republic Security Financial Corporation, Wachovia Acquisition
Corporation 2001-01 and The Bank of New York as Trustee, relating to the
Company's 10.35% Senior Debentures due on June 30, 2002 (incorporated by
reference to Exhibit 4.19 of Report on Form 10-Q of Wachovia Corporation
for the quarter ended March 31, 2001, File No. 1-9021).
4.20 Form of 10.35% Senior Debenture Due June 30, 2002 (incorporated by
reference to Exhibit 4.2 of Report on Form 10-K of Republic Security
Financial Corporation for the year ended December 31, 1999, File No.
000-14671).
4.21 Form of Series B 10.35% Senior Debenture due June 30, 2002 (incorporated
by reference to Exhibit 4.5 of Report on Form 10-K filed by First Palm
Beach Bancorp, Inc. for the fiscal year ended September 30, 1997, File
No. 0-21942).
10.1 Senior Management Incentive Plan of Wachovia Corporation as amended
through January 1, 1999 (incorporated by reference to Exhibit 10.4 of
Report on Form 10-Q of Wachovia Corporation for the quarter ended June
30, 1999, File No. 1-9021).
10.2 Wachovia Corporation Amended and Restated Executive Deferred
Compensation Plan (incorporated by reference to Exhibit 10.2 of Report
on Form 10-Q of Wachovia Corporation for the quarter ended March 31,
2000, File No. 1-9021).
10.3 Employment Agreement between Wachovia Corporation and L. M. Baker, Jr.
dated as of November 29, 1999 (incorporated by reference to Exhibit 10.3
of Report on Form 10-K of Wachovia Corporation for the year ended
December 31, 1999, File No. 1-9021).
10.4 Employment Agreement between Wachovia Corporation and Robert S. McCoy,
Jr. dated as of April 13, 2001.

EXHIBIT INDEX (continued)

10.5 Employment Agreement between Wachovia Corporation and G. Joseph
Prendergast dated as of October 22, 1999 (incorporated by reference to
Exhibit 10.5 of Report on Form 10-K of Wachovia Corporation for the year
ended December 31, 1999, File No. 1-9021).
10.6 Employment Agreement between Wachovia Corporation and Mickey W. Dry
dated as of October 22, 1999 (incorporated by reference to Exhibit 10.6
of Report on Form 10-K of Wachovia Corporation for the year ended
December 31, 1999, File No. 1-9021).
10.7 Employment Agreement between Wachovia Corporation and Jean E. Davis
dated as of October 22, 1999. (incorporated by reference to Exhibit 10.7
of Report on Form 10-K of Wachovia Corporation for the year ended
December 31, 2000, File No. 1-9021).
10.8 Form of Employment Agreement between Wachovia Corporation and Executive
Officers (other than Messrs. Baker, McCoy, Prendergast, Dry and Ms.
Davis) (incorporated by reference to Exhibit 10.8 of Report on Form 10-K
of Wachovia Corporation for the year ended December 31, 1999, File No.
1-9021).
10.9 Employment Agreement between Wachovia Corporation and Morris W. Offit
dated as of May 13, 1999 (incorporated by reference to Exhibit 10.1 of
Form S-4 Registration Statement of Wachovia Corporation dated June 25,
1999, File No. 333-81627).
10.10 Senior Executive Retirement Agreement between Wachovia Corporation and
L. M. Baker, Jr. dated as of November 29, 1999 (incorporated by
reference to Exhibit 10.10 of Report on Form 10-K of Wachovia
Corporation for the year ended December 31, 1999, File No. 1-9021).
10.11 Senior Executive Retirement Agreement between Wachovia Corporation and
Robert S. McCoy, Jr. dated as of April 13, 2001.
10.12 Senior Executive Retirement Agreement between Wachovia Corporation and
G. Joseph Prendergast dated as of October 22, 1999 (incorporated by
reference to Exhibit 10.12 of Report on Form 10-K of Wachovia
Corporation for the year ended December 31, 1999, File No. 1-9021).
10.13 Senior Executive Retirement Agreement between Wachovia Corporation and
Mickey W. Dry dated as of October 22, 1999 (incorporated by reference to
Exhibit 10.13 of Report on Form 10-K of Wachovia Corporation for the
year ended December 31, 1999, File No. 1-9021).
10.14 Senior Executive Retirement Agreement between Wachovia Corporation and
Jean E. Davis dated as of October 22, 1999 (incorporated by reference to
Exhibit 10.14 of Report on Form 10-K of Wachovia Corporation for the
year ended December 31, 2000, File No. 1-9021).
10.15 Form of Senior Executive Retirement Agreement between Wachovia
Corporation and Executive Officers (other than Messrs. Baker, McCoy,
Prendergast, Dry and Ms. Davis) (incorporated by reference to Exhibit
10.15 of Report on Form 10-K of Wachovia Corporation for the year ended
December 31, 1999, File No. 1-9021).
10.16 Senior Management and Director Stock Plan of Wachovia Corporation
(incorporated by reference to Exhibit 10 of Quarterly Report on Form 10-
Q of First Wachovia Corporation for the quarter ended March 31, 1989,
File No. 1-9021).
10.17 1990 Declaration of Amendment to Senior Management and Director Stock
Plan as described in Exhibit 10.16 hereto (incorporated by reference to
Exhibit 10.17 of Report on Form 10-K of First Wachovia Corporation for
the year ended December 31, 1989, File No. 1-9021).
10.18 1996 Declaration of Amendment to Senior Management and Director Stock
Plan as described in Exhibit 10.16 hereto (incorporated by reference to
Exhibit 10.24 of Report on Form 10-K of Wachovia Corporation for the
year ended December 31, 1996, File No. 1-9021).
10.19 Deferred Compensation Plan dated as of January 19, 1987, as amended
(incorporated by reference to Exhibit 10(c) of Report on Form 10-K of
South Carolina National Corporation for the year ended December 31,
1986, File No. 0-7042).
10.20 Amendment to Deferred Compensation Plan described in Exhibit 10.19
hereto (incorporated by reference to Exhibit 19(b) of Quarterly Report
on Form 10-Q of South Carolina National Corporation for the quarter
ended September 30, 1987, File No. 0-7042).
10.21 Amendment to Deferred Compensation Plan described in Exhibit 10.19
hereto (incorporated by reference to Exhibit 10(d) of Report on Form 10-
K of South Carolina National Corporation for the year ended December 31,
1988, File No. 0-7042).

EXHIBIT INDEX (continued)

10.22 Amendment to Deferred Compensation Plan described in Exhibit 10.19
hereto (incorporated by reference to Exhibit 10.35 of Report on Form 10-
K of Wachovia Corporation for the year ended December 31, 1993, File No.
1-9021).
10.23 Amended and Restated Wachovia Corporation Stock Plan. (incorporated by
reference to Exhibit 10.23 of Report on Form 10-Q for Wachovia
Corporation for the quarter ended September 30, 2000, File No. 1-9021).
10.24 Wachovia Corporation Director Deferred Stock Unit Plan (incorporated by
reference to Exhibit 10.37 of Report on Form 10-K of Wachovia
Corporation for the year ended December 31, 1996, File No. 1-9021).
10.25 Wachovia Corporation Executive Insurance Plan (incorporated by reference
to Exhibit 10.36 of Report on Form 10-K of Wachovia Corporation for the
year ended December 31, 1995, File No. 1-9021).
10.26 Executive Long-Term Disability Income Plan (incorporated by reference to
Exhibit 10.34 of Report on Form 10-K of Wachovia Corporation for the
year ended December 31, 1997, File No. 1-9021).
10.27 Split Dollar Life Insurance Agreement between Wachovia Corporation and
L. M. Baker, Jr. dated as of September 1, 2000 (incorporated by
reference to Exhibit 10.35 of Report on Form 10-Q for Wachovia
Corporation for the quarter ended September 30, 2000, File No. 1-9021).
10.28 Split Dollar Life Insurance Agreement between Wachovia Corporation and
Robert S McCoy Jr. dated as of September 1, 2000 (incorporated by
reference to Exhibit 10.36 of Report on Form 10-Q for Wachovia
Corporation for the quarter ended September 30, 2000, File No. 1-9021).
10.29 Split Dollar Life Insurance Agreement between Wachovia Corporation and
G. Joseph Prendergast dated as of September 1, 2000 (incorporated by
reference to Exhibit 10.37 of Report on Form 10-Q for Wachovia
Corporation for the quarter ended September 30, 2000, File No. 1-9021).
10.30 Split Dollar Life Insurance Agreement between Wachovia Corporation and
Mickey W Dry dated as of September 1, 2000 (incorporated by reference to
Exhibit 10.38 of Report on Form 10-Q for Wachovia Corporation for the
quarter ended September 30, 2000, File No. 1-9021).
10.31 Split Dollar Life Insurance Agreement between Wachovia Corporation and
Jean E. Davis dated as of September 20, 2000 (incorporated by reference
to Exhibit 10.31 of Report on Form 10-K for Wachovia Corporation for the
year ended December 31, 2000, File No. 1-9021).
10.32 Form of Callable Split Dollar Life Insurance Agreement between Wachovia
Corporation and Executive Officers (other than Messrs. Baker, McCoy,
Prendergast, Dry and Ms. Davis). (incorporated by reference to Exhibit
10.39 of Report on Form 10-Q for Wachovia Corporation for the quarter
ended September 30, 2000, File No. 1-9021).
10.33 Form of Non-Callable Split Dollar Life Insurance Agreement between
Wachovia Corporation and Executive Officers (other than Messrs. Baker,
McCoy, Prendergast, Dry and Ms. Davis). (incorporated by reference to
Exhibit 10.40 of Report on Form 10-Q for Wachovia Corporation for the
quarter ended September 30, 2000, File No. 1-9021).
11 Computation of Earnings Per Common Share (included on page 10 herein).
12 Statement setting forth computation of ratio of earnings to fixed
charges.