Wachovia

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For Moravian settlements in North Carolina, see Wachovia, North Carolina.

Wachovia Corporation

Type	Public (NYSE: WB)
Founded	1879
Headquarters	Charlotte, North Carolina
Key people	G. Kennedy Thompson Chairman & CEO; Thomas J. Wurtz, CFO
Industry	Finance and Insurance
Products	Financial Services
Net income	$7.79 billion USD(2006)^[1]
Employees	110,000
Slogan	Are You With Wachovia?
Website	www.wachovia.com

One Wachovia Tower in headquarters Charlotte, North Carolina.

Wachovia Corporation (NYSE: WB), based in Charlotte, North Carolina is one of the largest banking chains in the United States. Wachovia is a diversified financial services company that provides a broad range of banking, asset management, wealth management, and corporate and investment banking products and services. It is one of the largest providers of financial services in the United States, operating as Wachovia Bank in 15 states from Connecticut to Florida and west to Texas, and until merger integration activity is completed, as Western Financial Bank in California. It also serves retail brokerage clients under the name Wachovia Securities nationwide as well as in six Latin American countries, and investment banking clients in selected industries nationwide. Wachovia provides global services through more than 40 offices around the world.

1 Origin of corporate name
2 Corporate history
3 Wachovia today
4 Major sponsorships
5 References
6 External links
- 6.1 Data

[edit] Origin of corporate name

Wachovia, pronounced wah-KO-vee-yah, has one of the most unusual corporate names in the United States.^{[citation needed]} The origin of the name is the Latin form of the Austrian name Wachau. When Moravian settlers arrived in Bethabara, North Carolina in 1753, they gave this name to the land they acquired, because it resembled a valley along the Danube River called die Wachau. The area formerly known as Wachovia now makes up most of Forsyth County, and the largest city is now Winston-Salem.

Main article: Wachovia, North Carolina

[edit] Corporate history

Today's Wachovia Corporation was originally created by the merger of the legacy Wachovia Corporation and First Union Corporation. While the transaction was billed as a merger of equals, the transaction was actually a purchase of the legacy Wachovia by Charlotte-based First Union. First Union then took the Wachovia name.

[edit] Wachovia National Bank

Wachovia Corporation traces its history to 1879, when it was established as the Wachovia National Bank in Winston-Salem, North Carolina. The bank merged with Wachovia Loan and Trust (founded 1893) in 1911 and remained located in Winston-Salem. On December 12, 1986 Wachovia took over First Atlanta. Founded as Atlanta National Bank on September 14, 1865, and later renamed to First National Bank of Atlanta, this institution was the oldest national bank in Atlanta. This purchase made legacy Wachovia one of the few companies with dual headquarters: one in Winston-Salem and one in Atlanta. In 1998, legacy Wachovia acquired two Virginia-based banks, Jefferson National Bank and Central Fidelity Bank. In 2000, legacy Wachovia made its final purchase, which was Republic Security Bank, giving its first entry into Florida.

[edit] First Union

First Union Corporation was a large banking chain based in Charlotte, North Carolina. It purchased Wachovia Corporation in 2001, and the combined company kept Wachovia's name.

First Union National Bank of North Carolina was originally formed in 1958 with the merger of Union National Bank and First National Bank and Trust Company of Asheville. Over the decades, First Union purchased over 80 other banks before purchasing Wachovia, the majority of them in the 1990s.

[edit] CoreStates Financial purchase

CoreStates Financial Corporation, headquartered in Philadelphia, was acquired by First Union in April 1998.

The purchase proved to be a fiasco for a number of reasons. To start with, First Union attempted to rapidly integrate CoreStates' systems into First Union. This attempt led to multiple problems: poorly trained employees (as CoreStates tellers were not familiar with the new systems) and First Union and CoreStates' systems unable to communicate with each other, which led to such problems as account access issues and payments not being correctly applied to loans. As a result, customers left the bank in droves - First Union experienced a 19 percent attrition rate - because of poor customer service and the account issues. Furthermore, First Union substanially overpaid for CoreStates at over four times book value.

Partly due to the CoreStates purchase and partially due to 80 other bank purchases over the last few years, First Union experienced several years of lower earnings and no dividend growth. First Union had to restructure and lay off thousands of employees in 1999, partly as a result of the purchase of CoreStates.

[edit] Merger of First Union and Wachovia

The Wachovia Center (far right) and the Winston Tower, the former Wachovia Building, (left of middle) are the two tallest office buildings in Winston-Salem, NC.

On April 16, 2001, Charlotte-based First Union Corporation announced it would merge with Winston-Salem-based Wachovia Corporation. Although the merger was billed in the proxy as a merger of equals by pooling, the deal was actually a purchase of Wachovia by First Union. This was viewed with great surprise by the financial press and security analysts. While Wachovia had been viewed as an acquisition candidate after running into problems with earnings and credit quality in 2000, the suitor shocked analysts as most assumed that should Wachovia be sold it would be to SunTrust in the long-assumed "Smoke-and-Coke" merger (the nickname coming from Wachovia's long relationship with tobacco companies and SunTrust's holdings of Coke stock dating from Coke's initial public offering). The former CEO of Wachovia, Bud Baker, later said that he and First Union's CEO, Ken Thompson, met at interstate motels to keep their talks of merger as secret as possible.

As an important part of the deal, First Union would shed its name and assumed the Wachovia identity and stock ticker. Analysts said this move was most likely to help First Union acquire a new identity, as Wachovia's reputation was far better with consumers than First Union. At the same time, Wachovia's name and corporate identity would survive, an important source of pride to Wachovia's board.

The deal was met with criticism and doubt by several groups. Analysts were concerned of First Union's ability to merge with another large company because of the CoreStates deal. Citizens and politicians of Winston-Salem suffered from a hurt of their civic pride because the city would lose Wachovia's corporate headquarters to Charlotte, partly because Winston-Salem is a much smaller city than Charlotte. The city of Winston-Salem was concerned both by job losses by the move and the loss of stature from losing a corporation. First Union responded to these concerns by placing the wealth management and Carolinas-region headquarters in Winston-Salem.

On May 14, 2001, Atlanta-based SunTrust announced a rival takeover bid for Wachovia, the first hostile takeover attempt in the banking sector in many years. In its effort to make the "Smoke-and-Coke" deal appeal to investors, SunTrust argued that it would provide a smoother transition than First Union and offered a higher cash price for Wachovia stock than First Union. Long a rumored suitor for Wachovia, SunTrust had been in on-again off-again merger talks with it over the course of many years, with both Wachovia and SunTrust eventually confirming the most recent effort took place during the winter of 2000 before Wachovia terminated the discussions.

Wachovia's Board of Directors rejected SunTrust's offer and pledged to continue its merger with First Union. SunTrust continued its hostile takeover attempt, and a bitter battle between SunTrust and First Union took place over the summer. Both banks increased their offers for Wachovia, took out newspaper ads, mailed letters to shareholders, and initiated court battles to challenge each other's takeover bids. First Union even used its lobby power to have the North Carolina General Assembly change a corporate governance law in order to make it more difficult for SunTrust to purchase Wachovia.

On August 3, 2001, Wachovia shareholders approved the First Union deal. They rejected SunTrust's attempts to elect a new board of directors for Wachovia, and thus, ended SunTrust's hostile takeover.

Another problem concerned each banks' credit card divisions. In April of 2001, Wachovia agreed to sell its $8 billion credit card portfolio to Bank One. The cards, which would have still been branded as Wachovia, would have been issued through Bank One's First USA division. First Union had sold their credit card portfolio to MBNA in August of 2000. After entering into negotiations, the new Wachovia agreed to buy back its portfolio from Bank One in September of 2001 and resell it to MBNA. Wachovia paid Bank One a $350 million termination fee.

On September 4, 2001, First Union and Wachovia officially merged to form the new Wachovia Corporation.

In order to prevent a repeat of the CoreStates fiasco, the new Wachovia took a deliberately long period of time to combine the banking operations of the new company. Over a period of several years, legacy Wachovia computer systems were converted to First Union systems. The company first began converting systems in the Southeast United States (where both banks had branches) before moving to the Northeast, where First Union branches only had to change their signs to reflect the new company name and logo. This process officially ended on August 18, 2003, almost 2 years after the merger took place.

In comparison the CoreStates purchase, the merger of First Union and Wachovia has been a huge success. The company's slow strategy to combine seems to have prevented large customer attrition rates. In fact, Wachovia has been ranked number one in customer satisfaction every year since the merger. In addition, the company's stock price has remained strong, and provided a good return to legacy Wachovia shareholders, in contrast to SunTrust's claims during the takeover attempt. The company has also been reporting record revenues since the merger.

When Wachovia and First Union merged, the multiple skyscrapers with First Union's name came under Wachovia's name. Charlotte, North Carolina's One, Two, Three, and Four First Union buildings became One, Two, Three, and Four, Wachovia Center (respectively), and the 55-story First Union Financial Center in downtown Miami became the Wachovia Financial Center. The merger also affected the names of the indoor professional sports arenas in Philadelphia and Wilkes-Barre, Pennsylvania. Formerly known as the First Union Center and the First Union Spectrum (both Philadelphia) and First Union Arena (Wilkes-Barre), they are now known as the Wachovia Center, Wachovia Spectrum, and Wachovia Arena at Casey Plaza.

[edit] SouthTrust purchase

On November 1, 2004, Wachovia completed the acquisition of Birmingham, Alabama based banking competitor SouthTrust Corporation, a transaction valued at $14.3 billion. The merger created the largest bank in the southeast, the fourth largest bank in the United States in terms of holdings, and the second largest in terms of number of branches. Integration was completed by the end of 2005.

[edit] Westcorp purchase

Westcorp, Western Financial Bank’s parent company, WFS Financial Inc. and Wachovia announced their intention to merge in September 2005. Westcorp and WFS Financial Inc. shareholders approved the merger on Jan. 6, 2006 and on March 1, 2006, the merger was complete. The merger with Westcorp makes Wachovia the ninth-largest auto finance lender in the competitive U.S. auto finance market and provides Wachovia with a small retail and commercial banking presence in Southern California. On February 12th, 2007, the former 19 WFB branches opened under the Wachovia name. These are just a few of the many branches Wachovia will have on the west coast after a seperate merger with Golden West Financial is finalized.

[edit] Wachovia today

Wachovia Georgia Headquarters at Atlantic Station. Was previously SouthTrust's Georgia headquarters.

Wachovia is currently ranked number 57 on the Fortune 500 list for 2006, and is the fourth largest bank holding company in the US. It has banking centers in 15 East coast states and Washington, D.C. It also operates Wachovia Securities, its brokerage services subsidiary.

Wachovia Securities and the Prudential Securities Division of Prudential Financial Inc. combined to form Wachovia Securities LLC on July 1, 2003. Wachovia owns 62% of this entity, while Prudential Financial owns 38%. The new firm is the third largest full service retail brokerage firm based on assets.

Wachovia will enter the California market with its purchase of Western Financial Bank. This purchase will give Wachovia 19 branches in Southern California, but more importantly, will more than double the size of Wachovia's dealer financial services business, making it the nation's ninth largest auto loan originator.

In June of 2005, Wachovia negotiated to purchase monoline credit card company MBNA. However, the deal fell through when Wachovia balked at MBNA's purchase price. Within a week of the deal's collapse, MBNA entered into an agreement to be purchased by Wachovia's chief rival, Bank of America. Wachovia is set to get $100 million out of this deal, the result of an agreement Wachovia predecessor First Union made in 2000 when it sold its credit card portfolio to MBNA. This agreement required MBNA to pay this sum if it was ever sold to Bank of America.

Despite speculation that Wachovia might purchase a company with an established credit card division, such as Capital One, in late 2005 the company announced that it would end its relationship with MBNA and start up its own credit card division. By August of 2006, Wachovia had begun issuing its own Visa credit cards, though some operations will remain with MBNA until sometime in 2007.

Interestingly, Capital One was originally established as the credit card division of Signet Bank, which was later purchased by First Union prior to the Wachovia acquisition.

Wachovia agreed to purchase Golden West Financial for $24.2 billion on May 8, 2006. This acquisition would give Wachovia an additional 285-branch network spanning 10 states, including California. Wachovia has long desired to raise its profile in California, where Golden West holds $32 billion in deposits and operates 123 branches under the World Savings Bank brand. On October 1, 2006 Wachovia completed the acquisition of Golden West Financial Corporation. The integration process is scheduled to be completed mid-2008.

[edit] Major sponsorships

In addition to the venues in Philadelphia and Wilkes-Barre, Pennsylvania, Wachovia also sponsors an annual PGA tournament in Charlotte, called the Wachovia Championship. They also sponsor the following teams:

Wachovia was also a sponsor of a one-day bicycle race. An annual event held in the city of Philadelphia, the race has had numerous official name changes as a result of the various bank mergers and acquisitions mentioned above; having been variously know as the CoreStates Championship, the First Union Championship, etc. In November of 2005, Wachovia announced that they were ending their corporate sponsorship. Commerce Bank subsequently stepped in and will sponsor the 2006 race, which is now tentatively called the Philadelphia International Championship.