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Citigroup to acquire Wachovia

Customers of bank shouldn’t see disruption

POSTED: October 3, 2008 5:01 a.m.
SARA GUEVARA/The Times

Citigroup Inc. announced Monday that it will acquire the banking operations of Wachovia Corp., one of Hall County's and the nation's largest banks, in a deal facilitated by the Federal Deposit Insurance Corp.

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It was business as usual at Wachovia’s five branches in Hall County following an early morning announcement Monday that Citigroup Inc. will acquire the banking operations of Wachovia Corp., in a deal facilitated by the Federal Deposit Insurance Corp.

Citigroup will absorb up to $42 billion of losses in the deal, with the FDIC covering any remaining losses, officials with the government agency said Monday.

Citigroup also will grant the FDIC $12 billion in preferred stock and warrants. The FDIC asserted that Wachovia didn’t fail, that all depositors are protected and there will be no cost to the Deposit Insurance Fund.

The deal announced Monday does not include Wachovia Securities, which has an office in Gainesville. The firm, which began business in Gainesville in 1975 as A.G. Edwards, merged with Wachovia on Oct. 1, 2007. Wachovia Securities will continue under the ownership of Wachovia Corp., along with Evergreen Asset Management, a wealth management firm.

"I don’t think anything is going to change for us right now," said Warren Stribling, co-manager of the Gainesville office.

Wachovia operates five branches in Hall County and was the third-largest bank in terms of deposits, according to a 2007 FDIC report. The bank is the signature tenant of one of Gainesville’s largest office buildings, Wachovia Center, at the corner of Jesse Jewell and E.E. Butler parkways.

"For Wachovia customers, today’s action will ensure seamless continuity of service from their bank and full protection for all of their deposits," FDIC Chairwoman Sheila Bair said in a statement.

Wachovia’s origins in Gainesville began as the locally owned Gainesville National Bank, which merged in the 1980s with First National Bank of Atlanta, which did business as FirstAtlanta. The bank later merged with North Carolina-based Wachovia and adopted that name.

Allen Payne Long, a retired banking executive who was associated with Gainesville National, FirstAtlanta and Wachovia, said the acquisition is just a part of an ever-changing financial landscape.

"We had a few customers at the old Gainesville National who could not imagine doing business with an Atlanta bank," Long said. "Today’s news is just one of those life changes we’re going to adapt to."

Philip Wilheit, who was a director of Gainesville National and later served as chairman of GB&T Bancshares, which merged this year with SunTrust, said he and other Wachovia stockholders were "rocked to sleep" by the retention of the Wachovia name in the 2001 merger with First Union.

"A few years ago, I thought Wachovia was one of the best managed banks in the Southeast, if not the nation," Wilheit said, adding things changed after the First Union merger. "We thought the Wachovia culture was staying, but it didn’t. It was a First Union bank, and that was the beginning of the end for it."

For the Greater Hall Chamber of Commerce, Monday’s announcement was just another change in the local banking market.

"Wachovia and its predecessors have always been active participants with the chamber," said Kit Dunlap, chief executive of the Greater Hall Chamber of Commerce. "We are optimistic that Citigroup will want to do the same."

The sale of Wachovia Corp. comes days after the government’s seizure of Seattle-based Washington Mutual Inc. — the largest bank failure in U.S. history.

Even as details of its takeover unfolded, Wachovia shares fell 92 percent to 73 cents in premarket activity from Friday’s $10 closing price.
The Friday close represented a decline of 74 percent for the year. Wachovia has been among the banks hardest hit by the ongoing crisis in the mortgage market.

Its current problems stem largely from its acquisition of mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation’s housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West’s specialty, that let borrowers skip some payments.

This weekend Citigroup was reportedly in competition with Wells Fargo and Spain’s Banco Santander for the struggling bank. Banco Santander declined to comment early Monday and Wells Fargo spokesmen could not immediately be reached for comment.

The deal was brokered in consultation with Treasury Secretary Henry Paulson, President Bush and the Federal Reserve. The FDIC said it determined that assistance was necessary to "avoid serious adverse effects on economic conditions and financial stability."

The Associated Press and McClatchy-Tribune News Service contributed to this report.



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