With special thanks to Jon of North Carolina for allowing me to use his photo. You can see more of his photos on flickr.com via this link: http://www.flickr.com/photos/cherawsc/
Wachovia Corp. was acquired by Wells Fargo & Co. in late 2008. At the time, Wachovia was the No. 4 bank in the U.S.
First Union Corp.
First Union Bank traces its beginnings to 1908 when the Union National Bank was founded in Charlotte, North Carolina. For the first half-century, Union National remained a Charlotte bank. In 1958, it merged with First National Bank and Trust of Ashville, creating the First Union National Bank of North Carolina. In 1964, First Union acquired the Cameron-Brown Company, one of the largest mortgage loan companies in the Southeast.
In June 1985, the U.S. Supreme Court upheld state laws that permitted reciprocal regional interstate banking, meaning that banks from neighbouring states could merge with each other so long as they only operated within the same region. Prior to these state law changes, U.S. banks had been forbidden to operate out-of-state. North Carolina-based First Union promptly expanded out of state to South Carolina, Georgia, Tennessee and Florida. In the same year, it acquired the Northwestern Financial Corp. of Greensboro, North Carolina. Then in 1986, First Union bought Georgia's First Railroad and Banking Co. for USD $779-million.
The name Wachovia is the Latinized name of the German region of Wachau. In 1753, Moravian immigrants from present-day Germany settled on a tract of land in North Carolina that resembled the Danube River valley region of Der Wachau. The Moravian settlers named their settlement Wachovia to commemorate their home land.
Wachovia National Bank was founded in 1879 in the North Carolinian town of Winston. In 1893, another financial institution with a similar name, Wachovia Loan and Trust Co., was founded. The two Wachovias merged in 1911 to form Wachovia Bank and Trust Co. In the 1980s, restrictions on U.S. interstate banking were relaxed, allowing banks based in one state to acquire out-of-state banks. Wachovia Corp. promptly merged with Georgia's First Atlanta Corp. in 1985 to form the First Wachovia Corp.
- In 1991, Wachovia Corp. acquired the South Carolina National Corp. for USD $835-million.
- In 1996, First Union Corp. acquired Newark, N.J.-based First Fidelity Bancorp for USD $5.4-billion, expanding into New Jersey for the first time.
- In 1997, Wachovia purchased Charlotteville, Virgina-based Jefferson Bankshares Inc. (Jefferson National Bank) for USD $542-million.
- Late in 1997, Wachovia acquired Richmond, Virgina's Central Fidelity Banks Inc. for USD $2.3-billion.
- In 1997, First Union bought Virginia's Signet Bank for USD $3.25-billion. Signet operated 230 branches and 248 ATMs in the state.
- Also in 1997, First Union bought Philadelphia's CoreStates Financial Corp. for USD $17.1-billion.
- In 2001, First Union Corp. acquired rival Wachovia Corp. for USD $14.6-billion. However, the new entity took Wachovia's name.
- In 2004, the new Wachovia acquired Alabama's SouthTrust Corp. for USD $14.36-billion. SouthTrust had more than 700 branches in Alabama, Florida, Georgia, Mississippi, the Carolinas, Tennessee, Texas and Virginia.
- In 2005, Wachovia bought auto finance company Westcorp and its 84%-owned WFS Financial for USD $3.42-billion. Wachovia also offered USD $490-million to acquire the remaining 16% of WFS Financial from the open market.
- In 2006, Wachovia bought California's Golden West Financial Corp. for USD $25.5-billion at the very height of the real estate bubble.
- In 2007, Wachovia agreed to buy St. Louis-based investment broker A.G. Edwards Inc. for USD $6.8-billion in cash and stock. A.G. Edwards was founded in 1887 and held USD $773-billion of client assets. The purchase made Wachovia the No. 3 broker in the U.S. with USD $1.1-trillion in client assets. Merrill Lynch & Co. ranked No. 1 at the time, followed by Citigroup's Smith Barney division.
- Following the burst of the U.S. housing bubble in 2007, losses from the collateralized debt obligations (CDOs) soared to billions of dollars around the world and the inter-bank credit market froze during the summer of 2008. As analysts consistently questioned the viability of Wachovia, depositors transferred funds electronically to other banks despite that most deposits were insured by the Federal Deposit Insurance Corp. (FDIC).
- Globally, banks that relied on the credit market to finance their mortgage lending began to fail as their funding sources dried up. HBOS (Halifax Bank of Scotland), Fortis (Belgium and Netherlands) and Lehman Brothers all collapsed in September 2008. The former two were rescued by their respective national governments, while the U.S. government opted to let Lehman Brothers go bankrupt.
- On 2008-09-29, the FDIC took action and brokered a deal under which Citigroup would buy Wachovia's banking operations and 3,300 branches for USD $2.16-billion in stock. Citigroup would take over Wachovia’s USD $339-billion in deposits, a USD $312-billion loan pool, and be responsible for the first USD $42-billion in loan losses from the pool. The FDIC would absorb all losses beyond the first USD $42-billion. As part of deal, Citigroup would issue USD $12-billion of preferred securities and warrants to the FDIC for assuming the risk of Wachovia’s loans. Not included in the sale were Wachovia's A.G. Edwards and Evergreen divisions. Citigroup’s acquisition of Wachovia would strengthen Citigroup’s own capital base and lower its cost of capital as Wachovia’s huge client deposits would serve as a stable and inexpensive source of capital.
- Merely fours days later, in a bizarre twist of events, Wachovia rescinded its sale to Citigroup and agreed to a USD $15.1-billion buyout from Wells Fargo & Co. Under the new agreement, shareholders would receive 0.1991 share of Wells Fargo for each Wachovia share, valuing the offer at seven times that of Citigroup. In addition, Wells Fargo’s offer did not require any financial guarantee from the FDIC, and would also assume all of Wachovia’s preferred stock and debt. Wells Fargo said it expected to incur USD $10-billion in integration charges, and would raise USD $20-billion from issuing new securities to maintain its capital position. Citigroup immediately denounced the Wells Fargo-Wachovia merger proposal. Meanwhile, the FDIC said it continued to stand behind the original Citigroup-Wachovia merger over the Wells Fargo-Wachovia scenario.
- In the days following the new sale agreement, Citigroup and Wells Fargo engaged in a brief legal battle over who had the right to acquire Wachovia. At one point, Citigroup said it would sue Wells Fargo and Wachovia for USD $60-billion in damages for breaking off the original arrangement. However, on 2008-10-06, all three banks agreed to a temporary suspension of all lawsuits until the end of 2008-10-08 while they attempted to settle on the dispute, or whether they could carve up Wachovia amongst themselves.
- On 2008-10-07, however, Citigroup terminated talks with Wells Fargo and Wachovia, essentially ending its challenge to Wells Fargo’s acquisition of Wachovia. Subsequently, Wells Fargo & Co. closed its acquisition of Wachovia Corp. on 2008-12-31.
- In November 2010, Wells Fargo and Citigroup settled out of court over the fight for the beleaguered Wachovia. Under the terms of the settlement, Wells Fargo paid USD $100-million to Citi, and both banks terminated their lawsuits against each other.