10-Q/A 1 form10qa_57643.txt WACHOVIA FORM 10-Q/A WACHOVIA -------------------------------------------------------------------------------- Form 10-Q/A First Quarter 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A 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 March 31, 2001 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange 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 required 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No As of March 31, 2001, Wachovia Corporation had 210,334,977 shares of common stock outstanding. Explanatory Note This Quarterly Report on Form 10-Q/A for the quarterly period ended March 31, 2001 is being filed solely to add a new note to the Consolidated Financial Statements - Note 1 - Derivative Financial Instruments, in Part 1, Item 1. PART I -- FINANCIAL INFORMATION Item 1. Financial Statements

The unaudited consolidated financial statements referred to above do not include all information and footnotes required under generally accepted accounting principles. However, 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 presented. The results of operations shown in the interim statements are not necessarily indicative of the results that may be expected for the entire year. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements regarding Wachovia Corporation ("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," " anticipates," "estimates," " intends," "plans," "targets" or similar expressions are intended to identify forward-looking statements. These forward-looking statements 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 expectations expressed in such forward-looking statements: (1) business increases, 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; (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) technology 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 involved 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. 2 Consolidated Statements of Condition -------------------------------------------------------------------------------- ($ in thousands, except share data) wachovia corporation and subsidiaries

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

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

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

6 Notes to Consolidated Financial Statements -------------------------------------------------------------------------------- wachovia corporation and subsidiaries Note 1 -- Derivative Financial Instruments On January 1, 2001, Wachovia adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FASB 133), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Under FASB 133, all derivatives are required to be recorded on the balance sheet at fair value. For a derivative designated as a fair value hedge, the changes in the fair value of the derivative and changes in fair value of the hedged item attributable to the risk being hedged are recognized in the statement of income. For a derivative designated as a cash flow hedge, the effective portion of the changes in the fair value of the derivative are recorded in other comprehensive income (OCI) and are recognized in the statement of income when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in the statement of income. The change in fair value of derivatives not designated in a hedging relationship and derivatives that do not qualify as hedges under FASB 133 are recorded in the statement of income. Wachovia maintains derivative positions for both trading and risk management purposes. Trading derivatives are customer oriented, and trading positions are established as necessary to accommodate customers' requirements. Gains and losses from trading derivatives are included in capital markets income and are unaffected by the adoption of FASB 133. Interest rate swaps and options are used as part of Wachovia's overall interest rate risk management and are designated as hedges of interest-earning assets and interest-bearing liabilities. In connection with the adoption of FASB 133 on January 1, 2001, Wachovia recorded an $80 thousand gain in the statement of income and an after-tax gain of $620 thousand in OCI. As of March 31, 2001, Wachovia had fair value hedges with a notional amount of $5.5 billion for the purpose of converting fixed rate funding to floating rate. Wachovia also hedges a small amount of fixed rate loans. As of March 31, the fair value of these fair value hedge derivatives was $222 million. Year to date hedge ineffectiveness from fair value hedges totaling $174 thousand was recognized in other income in the statement of income. The methodology used to assess hedge effectiveness does not exclude any component of a derivatives fair value. Wachovia does not maintain any fair value hedges that are classified as hedges of a firm commitment. As of March 31, 2001, Wachovia had cash flow hedges with a notional amount of $1.1 billion. These derivatives are used to convert floating rate funding to fixed rate and to hedge both commercial and mortgage loans. The fair value of these cash flow hedges was $902 thousand and their effect on OCI was an after-tax gain of $539 thousand. Year to date, there has been no hedge ineffectiveness on these cash flow hedges, and accordingly, there was no impact on the statement of income. The methodology used to assess hedge effectiveness does not exclude any component of a derivatives fair value. Over the next 12 months, Wachovia expects to reclassify approximately $470 thousand of net gains on cash flow hedges from OCI into earnings, primarily to offset interest on floating rate instruments and proceeds from anticipated loan sales. The net derivative amounts included in OCI as of March 31, 2001, are expected to be reclassified into earnings through 2010. There are currently no hedging positions where it is probable that the forecasted transaction will not occur by the end of the originally specified time period or within an additional two months. Wachovia maintains two positions that, while used for risk management purposes, are not designated as hedges under FASB 133. As such, these derivatives are carried at fair value with unrealized gains recorded in the statement of income. Both of the positions mature during the second quarter of 2001, and as such should have a minimal future earnings impact. As of March 31, 2001, the notional amount of these derivatives was $300 million and with a corresponding positive fair value of $26 thousand. 7 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WACHOVIA CORPORATION /s/ ROBERT S. MCCOY, JR. June 26, 2001 ------------------------ By: Robert S. McCoy, Jr. Vice Chairman, Chief Financial Officer and Treasurer /s/ David L. Gaines June 26, 2001 ------------------------ By: David L. Gaines Comptroller 8

WACHOVIA CORP/ NC 10-Q/A