Wachovia Corporation Business Information, Profile, and History

One First Union Center
Charlotte, North Carolina 29288-0013
U.S.A.

Company Perspectives:

Completion of this merger is a defining moment for Wachovia and First Union, providing the opportunity to create of the finest companies in the world. We look forward to leveraging combined strengths to realize the potential of our new company and to build sustained value for our shareholders, customers, employees, and communities.

History of Wachovia Corporation

The new Wachovia Corporation was formed from the September 2001 merger of First Union Corporation and Wachovia Corporation. The deal created the fourth-largest bank holding company in the U.S. based on assets and the fifth-largest U.S. broker/dealer based on registered representatives. By combining forces, the new company offered financial services in 12 states through 2,800 branches, and also provided full-service brokerage in 49 states. Wachovia caters to nine million households and 900,000 businesses by offering such services as banking, brokerage, asset management, wealth management, treasury services, corporate and investment banking, international banking, credit and debit card products, trust services, mortgage banking, and home equity lending.

History of First Union

Before its merger with Wachovia, First Union ranked as the nation's sixth largest bank holding company, based on total assets of $254 billion in 2000. Its employee base--71,262 strong--served a customer group of more than 7 million people. The firm's 2,200 banking branch offices along the East Coast made it the nation's third largest bank branch network. The company provided full-service investment banking, retail banking, commercial banking, and trust services. First Union also had 375 diversified offices throughout the United States that provided its customer base with brokerage services.

First Union traces its founding to 1908 as the Charlotte-based Union National Bank. The First Union name made its initial appearance in 1958 following the merger between Union National Bank and Asheville, North Carolina-based First National Bank. At the time of the merger, the new bank became the first Charlotte bank to own branch offices in another city.

Union National Bank's founder, H.M. Victor, would have a difficult time recognizing the bank he founded in 1908. The company's first offices were in the modest Buford Hotel on Charlotte's main downtown thoroughfare of Tryon Street. Victor raised funds to start Union National Bank by selling 1,000 shares of stock at $100 each. Next, he set up his office at a roll-top desk in the hotel's main lobby. Soon, Victor had earned a reputation as a conservative banker who always confirmed his customers' creditworthiness prior to issuing them any loans. For many years, Victor even refused to make loans for the then newly invented automobile. Finally, he relented with a loan to a customer for a Model-T Ford. Just to be safe, however, he held the owner's keys and title until the loan was repaid in full.

As Union National grew, the company maintained the reputation Victor had established as being an institution of high credit quality, strong financial performance, and excellent customer service. It was this image and visibility that kept the bank open during the troubled 1930s. The Great Depression forced many of Union National's competitors to shut their doors permanently during that era.

In the successful decades the followed the depression, Union National Bank stood out as a pioneer and leader in many areas of the banking industry, and it developed an innovative approach to growth and diversification. For example, in 1947 Union National became the first Charlotte-based bank to open a branch office. Later, it was the first bank to offer a flat-fee checking account. Even before the development of MasterCard and Visa, Union National was the first bank to offer a charge card. Through the years, First Union has followed this legacy of leadership, becoming the first bank in the United States to link all of its branches by satellite for data transmission in 1993.

In 1958, a visionary leader at Union National by the name of Carl McCraw, Sr.--then serving as president of the bank--recognized that the future of U.S. banking lay in a strong branching network. With a young manager by the name of C.C. Hope, McCraw traveled to New York to study mergers in depth. McCraw was in very good company with the young Mr. Hope. Hope was later to become vice chairman of the corporation, president of the American Bankers Association, and director of the Federal Deposit Insurance Corporation before his death in 1993.

McCraw and Hope studied bank mergers diligently, and their research paid off later that year when Union National merged with First National Bank and Trust Company of Asheville. The merger created the First Union National Bank of North Carolina. By 1964, the company had further diversified by acquiring the Raleigh-based Cameron-Brown Company. Cameron-Brown was one of the Southeast's leading mortgage banking and insurance companies. The acquisition propelled First Union to become one of only a few banking companies that was legally empowered to offer a full line of insurance and mortgage products to its customers in all 50 states. Cameron-Brown changed its name to First Union Mortgage Corporation in 1986. By 1994, the mortgage company stood as one of the nation's 11 largest mortgage banking companies based on mortgage servicing volume.

The late 1960s brought more organizational change to First Union. During that time, the company formed a bank holding company, and C.C. Cameron, the founder of Cameron-Brown, became chairman of the newly formed holding company. By December 31, 1968, First Union formed a bank holding company with total assets of nearly $1 billion. In 1973, Edward E. Crutchfield, Jr., became the nation's youngest president of a major banking company when he was named president of First Union at age 32.

From the 1960s to the mid-1980s, First Union expanded across the state, merging with more than thirty banks and adding branches to its statewide system. In 1985, the Supreme Court approved regional interstate banking, and First Union was among the first U.S. banks to take advantage of this decision. At that time, the company expanded into other states and acquired banks in North and South Carolina, Georgia, Florida, and Tennessee.

Also in 1985, Crutchfield succeeded Cameron as chairman and chief executive officer of First Union Corporation. That year, he conducted an expansion program that encompassed Northwestern Financial Corporation of Greensboro, North Carolina. The merger was the largest in North Carolina's history, and it created the state's second largest bank. It also established First Union's flagship banking operation.

In 1988, First Union's national presence was sufficient to warrant listing its stock on the New York Stock Exchange. Prior to this event, the stock was traded only over the counter. Between 1985 and 1994, First Union used its powerful statewide foundation to complete 40 acquisitions and mergers with banks in North and South Carolina, Georgia, Tennessee, and Florida. In 1993, the company expanded its banking operations into Virginia, Maryland, and Washington, D.C. The corporation grew from $8.2 billion in assets on June 30, 1985, to $70.8 billion on December 31, 1993.

First Union's basic business strategy was to seek out other banking organizations with compatible management and philosophies. By merging with such similar companies, First Union maintained the reputation established by Victor at the original Union National. The bank held firmly to its image of strong financial performance and quality products and service. As the company consolidated the operations of its acquired banking partners, First Union managed to achieve efficiencies by standardizing products, policies, and procedures and by making full use of high technology automation systems.

During its growth years, First Union's transition was strengthened by such leaders as Frank H. Dunn, Jr., chairman and chief executive officer of First Union National Bank of North Carolina; Byron E. Hodnett, chief executive officer of First Union National Bank of Florida; Harald R. Hansen, chairman, president, and chief executive officer of First Union National Bank of Georgia; Sidney B. Tate, chairman, president, and chief executive officer of First Union Bank of South Carolina; Robert L. Reid, chairman, president, and chief executive officer of First Union National Bank of Tennessee; and Benjamin P. Jenkins, president and chief operating officer of First Union National Bank of Virginia. The banks' mergers also added the talents of B. J. Walker, formerly of Atlantic Bancorporation and by 1994 vice-chairman of First Union Corporation, to First Union's arsenal.

Through the early 1990s, management of First Union's sales, marketing, and customer service fell under the jurisdiction of John R. Georgius, president of the corporation. Georgius helped develop the Quality Customer Service (QCS) program, which by 1994 had become an industry-wide model. Under the Quality Customer Service program, First Union constantly trained employees on improved techniques for customer service and sales. Employees earned cash incentives for achieving the program's high standards of service. The corporation's incentive program was just one example of its full commitment to providing quality service to its more than seven million customers. It also served as a baseline for attracting new customers. As Georgius stated in First Union's Corporate Overview, "In the 1990s, there should be no question that First Union is one of the finest sales-driven, service-oriented organizations in the United States."

Other people took notice of First Union's success, on both the customer service front and the financial front. First Union Corporation was profiled as one of the 101 Companies That Profit from Customer Care, a book that cited role models "for the new American manager." The book praises First Union for its Quality Customer Service program, for its aggressive "mystery shopping" program by an independent firm, and for its in-depth market research into customer definitions of service.

In the 1990s, First Union also continued to build its product inventory. For example, the company built the most competitive foreign exchange operation in the southeastern United States, with a team of experienced traders who provided pricing and advice 24 hours a day. The foreign exchange operation assisted more than 350 corporate customers in some 54,000 transactions in 1993. This exchange operation became increasingly important in the North Carolina region as it attracted foreign-owned corporations at a rate that outpaced the rest of the nation.

Also, after nearly a decade of using derivatives to manage interest rate risk, First Union established a "derivatives products" business in 1993. That year, the company assisted 300 corporate customers in nearly 500 transactions to manage interest-rate risk, reduce the cost of financing their businesses, and expand the financing opportunities available to them. The "capital partners" group was established in 1987 to provide merchant banking services to its southeastern communities. First Union also had financing specialists in such fields as trade finance, communications, health care, energy, lease finance, transportation, mortgage banking, and insurance.

That same year, First Union launched an aggressive new strategy to compete head-on with major brokerage and investment banking firms. The company estimated there were more than 100,000 corporations and entrepreneurs at the time who need alternative financing solutions to traditional bank loans. Among those products First Union offered were syndicated loans, private placements, securitization of assets, mezzanine financing, and equity capital. The company had recruited more than 60 capital markets experts from top money centers to spearhead the initiative.

After eight years of offering its own proprietary mutual funds, First Union began rapidly developing a licensed sales force to sell mutual funds in 1993. The company increased its range of financial offerings with the acquisition of Lieber & Company, advisor to the Evergreen Funds.

One element on First Union's side for future growth and success was its home region. The South Atlantic region of the United States witnessed continued movement, or "in-migration," of people into the area from other parts of the nation. During the last decade, the South Atlantic states gained 3.3 million people in population in-migration. First Union's experts predicted that the rate would rise to 4.1 million people over the next decade. This rate is significantly better than any other region in the United States. Between 1991 and 1993, the South Atlantic region attracted more than 3,300 new or expanded plants and offices, 35 percent more than any other region and 29 percent of all new corporate locations in the United States. The South Atlantic region also attracted 45 percent of all new and expanded foreign-based facilities during this same time period. All of these statistics were even more remarkable because the region represented only 18 percent of the total United States population.

As banking opportunities increased with rapid regional growth, First Union's banking region was projected to continue to outpace the rest of the nation in population, employment, and personal income growth throughout the 1990s. This situation, plus First Union's inherent financial strength, meant that the company was well positioned for growth, with resources, management talent, technological advantage, market position, and products to continue to lead the pack in the banking world.

During the mid-1990s, Chairman Crutchfield described First Union's mission "to be the best place for companies and individuals to obtain the financial services and products they want--and then to delight them with our efforts to help them achieve their financial goals." He continued, "When an individual wants an equity mutual fund, or a corporate treasurer seeks to hedge foreign currency exposure, or a state or municipality wants to issue general obligation bonds, or any customer has any financial need, our vision is for them to think, "I bet First Union offers that.'"

As such, First Union sought to build its product and services portfolio as well as boost brand recognition through acquisitions as the banking industry continued to consolidate into the late 1990s. By now, the company had made nearly 40 purchases since 1985 and continued with this strategy. In 1996, the bank expanded into the New Jersey market with the purchase of First Fidelity Bancorp. The following year, First Union announced its $17 billion offer for Philadelphia, Pennsylvania-based CoreStates Financial Corp. Upon completion of the deal, First Union became the number one bank in both New Jersey and Pennsylvania. In 1998, investment bank First Wheat Butcher Singer, Bowles Hollowell Conner & Co., Covenant Bancorp, and consumer finance company Money Store Inc. were also purchased. Then, in 1999, the firm set its sights on Chicago-based Everen Capital Corp. The acquisition bolstered the firm's retail brokerage services by 46 percent and increased its number of brokers by 42 percent.

The company's activities proved costly, and by 1999 revenue growth was declining. The company also began to post lower than expected earnings that, in turn, caused First Union's stock price to fall. In February of that year, the bank announced that it would cut up to 10 percent of its work force. The company also began to close unprofitable branches and divest slow growth holdings. After he was diagnosed with cancer in 2000, Crutchfield turned over his CEO post to G. Kennedy Thompson and retired from the firm in March 2001. That same year, the firm announced a $2.8 billion restructuring effort that included shutting down the home equity lending operations of the Money Store and selling its mortgage servicing and credit card portfolios.

The firm's new focus was on three core businesses: the general bank, capital management, and capital markets. Under the leadership of Thompson, First Union claimed that its acquisition spree had ended in order to control costs and foster internal development. Revenue growth continued to elude the bank, however, and analysts began to speculate that First Union was prime for takeover. The company then shocked the banking industry when it made a $14 billion bid for competitor Wachovia Corp.--just a few short months after it announced its departure from the acquisition arena.

History of Wachovia

Before its merger with First Union, Wachovia operated as a southeastern interstate bank holding company with dual headquarters in Atlanta, Georgia, and Winston-Salem, North Carolina. The company's Retail Financial Services unit had approximately 668 banking offices in Florida, Georgia, North and South Carolina, and Virginia, and served 3.8 million customers. Its services included checking and savings, mortgage lending, consumer loans, and credit cards. Wachovia's Corporate Financial Services division provided commercial lending, leasing and leveraged finance, treasury consulting, payments and information services, investment banking, debt and equity capital markets services, executive services, commercial insurance, and asset management. Its clients included over 28,000 businesses in the United States and 40 other countries. The firm's Asset and Wealth Management business provided full service brokerage and a host of asset management services to over 40,000 wealth management customers and 260,000 investment client households. In 2000, Wachovia's assets reached $74 billion.

While the banking industry was marked by fierce competition and volatility in the early 1990s, Wachovia managed to maintain its prominence in both size and reputation. In 1994, Wachovia was listed by Financial World magazine as the most financially stable of the nation's largest bank companies holding assets greater than $30 billion. A September 15, 1992 article in the American Banker attributed the bank's "enviable performance record" to "one of the lowest loss experiences in the industry and its place as one of the highest and most stable earners."

Wachovia's preeminence in the banking industry and its broad range of services was secured by a strategic merger in the mid-1980s. Within a week of the June 10, 1985 Supreme Court decision to uphold regional reciprocal interstate banking, Wachovia and First Atlanta Corp. merged their respective strengths and market coverage into a new company, First Wachovia Corporation. In May 1991, the organization moved to employ a single identity for all its constituent parts: The First National Bank of Atlanta became Wachovia Bank of Georgia; Wachovia Bank and Trust Company became Wachovia Bank of North Carolina; and the parent company, First Wachovia Corporation, was renamed Wachovia Corporation. Then on December 6, 1991, South Carolina National Corporation joined the bandwagon and added its member bank, South Carolina National Bank (SCN) to the Wachovia family. Following the trend toward a common corporate identity, SCN changed its name to Wachovia Bank of South Carolina in May 1994.

In 2000, the company's main subsidiaries included Wachovia Bank N.A., Wachovia Securities Inc., The First National Bank of Atlanta, and OFFITBANK. Its original subsidiaries were secured under one common parent company by the mid-1990s, and each bank remained a separate legal entity with its own board of directors, management, and staff. Moreover, each of the three original banks--Wachovia Bank of Georgia, Wachovia Bank of North Carolina, and Wachovia Bank of South Carolina--were invested with a long history of its own, adding yet another layer of complexity--and interest--to Wachovia's past.

Wachovia Bank of Georgia traces its history to the Civil War, the subsequent financial rebuilding of Atlanta, and the determination of one prominent civic leader, General Alfred Austell, who gained banking experience at Atlanta's Bank of Fulton. After this bank closed at the end of the war, Austell played a significant role in both redeeming the Bank of Fulton's Confederate notes and in plying influential contacts in Washington, D.C., toward securing a national bank charter for Atlanta. On September 14, 1865, a federal charter was granted to the Atlanta National Bank making it the first national bank in the Southeast. Austell became president.

Other Georgia entrepreneurs made the best of reconstruction and formed banks that would eventually branch into the Wachovia tree. Joining forces with his father, Colonel Robert J. Lowry founded the state-chartered Lowry Banking Company. Changing to a national charter, that bank became the Lowry National Bank in 1900.

Colonel Robert Flournoy Maddox and his partner, Jett Rucker, established a planters' warehouse that eventually became a lending business, using tobacco and cotton as collateral. In 1879, the partners moved exclusively into banking with the establishment of a private bank, Maddox-Rucker & Company, which obtained a National Charter and changed its name to American National Bank in 1908. Their enterprise continued to grow over the next several decades, converting to a state-chartered bank--the Maddox-Rucker Banking Company--in 1891, and finally obtaining a national charter and changing its name to American National Bank in 1908.

From his post as mayor of Atlanta in 1880, Captain James W. English was well connected to start yet another influential Georgia bank. By 1889, he had become one of the founders and in 1890 was named the president of state-chartered American Trust and Banking Company. By 1896, the bank had adopted a federal charter as the Fourth National Bank of Atlanta.

Though these early Georgia banks continued to prosper beyond the turn of the century, they were constrained by a state law prohibiting banks from expanding beyond their city limits. A series of mergers that began just before World War I, however, provided an alternative means of growth. In 1916, Atlanta National Bank merged with American National and kept the Atlanta National name. In 1923, Lowry National Bank merged with Trust Company of Georgia to become the Lowry Bank and Trust Company of Georgia; a year later, the new entity merged with Atlanta National to become the Atlanta and Lowry National Bank. Finally, in 1929, the Atlanta and Lowry National Bank merged with the Fourth National Bank to become The First National Bank of Atlanta, making it the largest and the oldest national bank in the Southeast.

While banking in postbellum Georgia was undergoing rapid change and consolidation, important predecessors to Wachovia were also evolving in North Carolina. In 1804, the state's General Assembly chartered North Carolina's first two banks--the Bank of Cape Fear and the New Bern Bank. Though organized banking came relatively late to North Carolina, its charter offered one main advantage over other state banking charters: statewide branch banking was permitted. By 1847, with Israel Lash as cashier, the bank had its first full-time branch in Salem.

Although the Bank of Cape Fear, like many of its peers, did not survive the Civil War, Lash used it as the groundwork for the First National Bank of Salem, which opened in 1866 with Lash as president and his nephew, William Lemly, as cashier. When Lash died in the late 1870s, Lemly helped implement new growth and change at the bank. After choosing a new site in the adjoining town of Winston and signing a new charter, he established Wachovia National Bank on June 16, 1879. Wyatt Bowman served as the bank's first president until his death in 1882, when Lemly took the helm.

Meanwhile, economic growth in the Piedmont region precipitated the development of trust companies. In 1891, a group of local financiers proposed legislation to permit the new innovative combination of banking services with the responsibilities of trust management. The North Carolina General Assembly voted favorably, and on June 15, 1893 Wachovia Loan and Trust Company became the state's first chartered trust company.

The Loan and Trust Company's early success was largely attributable to the unusual perseverance and innovation of its chief management; Francis Henry Fries served as president, and his nephew, Henry Fries Shaffner, served as secretary-treasurer. Fries and Shaffner distinguished Wachovia Loan and Trust as a financial innovator.

The new bank's name reflected its regional bent. Salem and Winston were situated in the Piedmont region, primarily settled by Moravian colonists of German descent in the 1750s. Their benefactor, Count Zinzendorf, traced his ancestral roots to a region along the Danube known as Der Wachau. In deference to that lineage, the Moravians called their new home and many of its businesses "Wachovia."

In 1910, that name was again put to use, this time to describe a third Wachovia, the merger between Wachovia National Bank and Wachovia Loan and Trust Company. The new institution, Wachovia Bank and Trust Company, opened its doors for business on January 1, 1911.

With deposits of $4 million and a total capital base of $7 million, the consolidated bank stood out as the largest bank in the South and one of the largest trusts in the East. Management of the institutions also merged: Francis Fries was elected president, and James Gray--former president of Wachovia National Bank--became vice-president. The new bank distinguished itself with innovations across the financial board. Over the next several decades, the bank continued to grow, joining the Federal Reserve System in 1918, opening a second Winston-Salem office in 1919 (the two towns became a single civic entity in 1913), and merging with Forsyth Savings to establish a third Winston-Salem location in 1930.

While the turn-of-the-century predecessors to Wachovia Corp. were taking shape in Georgia and North Carolina, South Carolina saw the development of other financial institutions that would eventually join Wachovia. In 1792, the Bank of the United States opened a branch bank in the port city of Charleston. The branch also served as a depository for federal taxes and duties. On December 17, 1834, the state approved an act chartering the Bank of Charleston. In July, the stockholders appointed James Hamilton, Jr., president, and, by late November, the Bank of Charleston had replaced the public Branch Bank of the United States as a major new private financial institution in the region.

Early growth of the Bank of Charleston was attributable to Henry Workman Conner, who became president in 1841. Connor gained a reputation for his hard work and initiative, and under his leadership the bank instituted an early interstate banking venture by creating a network of financial agencies from Augusta, Georgia, to New Orleans, Louisiana, and beyond. By 1848, the agency department accounted for $7.5 million in transactions, up from $300,000 only seven years earlier. As Charleston became an even more important trading hub, the bank's operations continued to grow until the Civil War. After Gordon Rose was elected president in 1850, the bank consistently managed to declare dividends that averaged 8 to 10 percent of its capital stock per year, while keeping total assets well ahead of liabilities.

The Civil War temporarily interrupted the Bank of Charleston's upward trajectory. In fact, by 1869, the bank was insolvent. Nevertheless, under the guidance of president Archibald S. Johnson, the Bank of Charleston became the only antebellum South Carolina bank to revive itself during Reconstruction. After stockholders approved the conversion to a national charter, the bank reopened its Broad Street office in 1872; and even though its national charter prohibited branch banking, it remained a strong presence in the industry for decades.

In 1914, as Europe became embroiled in war, the Bank of Charleston joined the newly formed Federal Reserve System, designed to stabilize the national banking system. In 1922, the Comptroller of the Currency authorized two branch banks, allowing for greater volume of accounts for small businesses and individuals, and paving the way for further expansion.

The bank's development reached a new plateau in 1926, when its twelfth president, Robert S. Small, oversaw the consolidation of the Carolina National Bank of Columbia and the Norwood National Bank of Greenville with the Bank of Charleston to form The South Carolina National Bank. By the early 1930s, The South Carolina National Bank was present in 19 cities and communities across the state and provided a broad range of services.

From World War I to the 1980s, The South Carolina National Bank, The First National Bank of Atlanta, and Wachovia Bank and Trust Company responded to industry-wide trends in ways that would influence their eventual alliance. As the banking industry grew at unprecedented rate, one major problem faced by all banks--including Wachovia's ancestors--was that of currency control. The result was a boom-and-bust trend: panics in 1837, 1873, 1893, 1903, 1907, for example, undermined credit stability and set both banks and their clients on edge--if not in the red.

In 1912, Congressman Carter Glass proposed a system to improve mobility of bank reserves and provide a standard for controlling checking deposits. On December 24, 1913, the Federal Reserve Act was signed into law. Creating a system of regional Federal Reserve Banks, the law required all national banks to become members and keep a portion of their reserves on deposit in a Federal Reserve branch. State banks were given the option of joining the system. Incentives were introduced to entice national banks into keeping their federal charters: banks holding such charters were permitted, for the first time, to offer trust services, real estate loans, and mortgage loans. Passage of the McFadden Act of 1927 further empowered existing banks to engage in intrastate branch banking.

After the Great Depression mandated a national bank holiday that forced all banks to close, the federal government outlined new standards to assess the readiness of banks to reopen. Wachovia Bank and The First National Bank of Atlanta were among the first banks to pass the test. Shortly thereafter, the Banking Act of 1933 established more permanent controls. Strict federal insurance of deposits became the rule, and state-chartered banks were strongly encouraged to participate. Moreover, commercial banking was separated from most securities underwriting and trading, an area that was thereafter regulated by the new Securities and Exchange Commission.

Just as the effects of the Depression began to subside, World War II began, launching Wachovia's precursors into an all-out campaign to help finance the Treasury Department by selling defense bonds and providing other financial services. Wachovia, The First National Bank of Atlanta, and SCN all helped finance the war effort.

The postwar era saw a surge in economic growth, spurring new and expanded bank services. New term installment loans replaced the more volatile "call-loan" approach. No longer permitted to underwrite stocks or bonds of private enterprise, banks joined a massive "T-loan" program to implement corporate lending. And a sweeping Social Security system introduced in the 1930s began manifesting itself in the growing number of retirement and pension plans, many of which were funded by trust institutions and the trust departments of banks. Wachovia and SCN offered new financial services to accommodate these changes.

With the advent of heightened competition in the 1960s, banks introduced more flexible financial products and services. More and more savings were flowing out of banks and into other institutions--so-called nonbank banks--that were not controlled by such restrictions as interest-rate ceilings or reserve requirements. To compete with these investment firms, insurance companies, and retailers with financial subsidiaries, banks called for regulatory reform. After 1962, interest rate ceilings were slightly relaxed, giving banks a bit more competitive ground, especially with the development of such products as negotiable certificates of deposit and variable-rate mortgages linking rates on loans to the prime rate, reserve-free foreign investments, and Eurodollar investing. The First National Bank of Atlanta, SCN and Wachovia Bank--like many others--established formal international departments in the 1960s.

Banks also found other creative solutions to existing regulations. The Bank Holding Company Act of 1956, for example, prohibited bank holding companies from expanding across state lines. However, that provision did not apply to holding companies with only one bank, and, consequently, many commercial banks established themselves as subsidiaries of "one-bank holding companies." Not surprisingly, Wachovia's three relatives established their own holding companies: The Wachovia Corporation in 1968; First National Holding Corporation in 1969; and South Carolina National Corporation in 1972.

The 1970s were marked by further bank deregulation, permitting greater diversification in the industry. In 1970, an amendment to the Bank Holding Company Act permitted bank holding companies to engage in a far wider range of banking-related businesses. Diversification became the order of the day. First Atlanta established an overseas office in London and, at home, capitalized on new statewide banking privileges to acquire 13 banks across Georgia. In the 1970s, Wachovia introduced its Personal Banker program to augment retail customer banking using computerized account management and in 1980 forged ahead in its introduction of adjustable mortgages. SCN's Common Trust Fund reflected a new rise in trust services, also carried out by Wachovia's master trust service and First Atlanta's Timberland Fund.

Nevertheless, overall economic malaise in the United States strained financial markets. Factors such as inflation and foreign oil dependency--culminating in the Arab oil embargoes of 1973 and 1978--prompted Congress to consider revisions of federal fiscal policy. Wachovia's conservative policies--such as high loan loss reserves and low loan-to-deposit ratios--helped the bank weather the recession almost unscathed, while its largest competitor in the Southeast, NCNB Corp., suffered significant losses. "We are going back to a more purist view of banking," CEO John G. Medlin Jr. told Business Week magazine on November 1, 1976.

Legislation passed in 1980 continued the trend toward bank deregulation. That year, the Financial Institutions Deregulation and Monetary Control Act lifted interest-rate ceilings on savings accounts linked to transaction accounts, phasing out regulation and interest-rate ceilings within two years. Banks were thus better able to compete head-on with the likes of money market mutual funds.

Bank holding companies gained still greater freedom to compete more equitably with the U.S. Supreme Court passage, in June 1985, of legislation upholding their right to reciprocal interstate banking. Within days of the court ruling, leading financial institutions moved to realize the mutual benefits of a new era in banking. Wachovia Corporation merged with First Atlantic on December 5, 1985, and on December 6, 1991, they were joined by SCN.

A concerted effort was made to establish a joint identity for the growing holding company. On May 31, 1994, SCN began operating as Wachovia Bank of South Carolina. A campaign of advertisements and celebrations heralded the common name, embodied by the blue Wachovia sign and logo. The program to adopt a unifying corporate identity--which had begun in 1990--was completed in just under four years.

Much of Wachovia's success could be attributed to the corporation's use of technology to connect its widespread network of members and to provide new, sophisticated services. As early as the 1970s, automated teller machines provided 24-hour-a-day account information and cash. Tape-driven computers were eventually replaced by electronic machines capable of unprecedented processing power.

By the 1980s and 1990s, new technologies helped Wachovia achieve a whole new level of information management and service delivery. First Atlanta and Wachovia were early leaders in highly automated lockbox centers to process receivables and provide cash management services to corporations. SCN helped pioneer debit card electronic transaction banking, while First Atlanta contributed to anti-fraud systems designed for merchants using VISA or MasterCard. In tandem with state-of-the-art operational centers to coordinate general operations across all three states, Wachovia collaborated with the Federal Reserve to develop date encryption systems to maximize transmission security. In addition, from 1991 to 1993, Wachovia spent more than $3 million on computer-aided software engineering, known as CASE, to set the groundwork for a competitive edge in the design and maintenance of new banking products. "If CASE delivers even a fraction of what we feel comfortable it will do," Walter E. Leonard Jr., president of Wachovia Operational Services Inc., told the American Banker on July 6, 1993, "this is a very important thing for us over the long haul."

On January 1, 1994, L.M. Baker, Jr., stepped up as CEO of Wachovia, succeeding John G. Medlin, Jr., who remained the board's chairperson. Along with Baker, a new management team set ambitious goals for the corporation's transition into the twenty-first century. Following an industry trend toward increased centralization, Wachovia Corp. created a General Banking Division to manage retail and home-market commercial operations across its three states. The new division was headed by G. Joseph Prendergast. "All we've done here is taken the three banks and put me in the position of trying to facilitate the coordination of an agenda," Mr. Prendergast told the American Banker on November 14, 1994. That agenda included a number of measures, including scaling back the branch networks in all three states, consolidating Wachovia's back office, and automating processes for greater efficiency.

Indeed, efficiency was a key factor for a corporation that had grown out of a myriad of banks to become one of the Southeast's largest financial institutions in the 1990s. One risk of consolidation and closing branches would be a loss of customers to competitors. The proper implementation of technological systems, on the other hand, could enable the corporation to reach a far wider client base with fewer conventional branches. In this regard, Wachovia's aggressive investment in CASE technology could pay off handsomely in the long term. Still, Wachovia's complexity remained somewhat daunting. In the Winston-Salem Journal of March 21, 1994, Mr. Baker summarized a jocular exchange with his recent predecessor: "John Medlin came in the other day and said, 'How are things going,' and I said, 'I haven't the slightest idea. ...'" As the leader of one of the world's most reputable banks, Baker epitomized the sort of humor derived from deep-set confidence, yet at the same time acknowledged uncertainty in a volatile and quickly changing industry.

While its rivals were making headlines with major acquisitions, Wachovia had taken a different approach to remaining competitive during the mid-1990s. Its last major purchase being that of SCN in 1991, Wachovia held firm to its belief that consistent, solid, and reputable services were key to survival. The company was eventually forced, however, to begin making acquisitions as consolidation continued. The bank began to build an international presence by forming partnerships with London-based HSBC Holdings plc and Bank Mendes Gans from Amersterdam. In 1997, the firm made its first global acquisition by purchasing Banco Portugues do Atlantico-Brazil S.A. A 1997 American Banker article explained the company's strategy as a company executive commented that "what's very clear is that international capabilities and global services will be a key determinant of a bank's ability to maintain and develop large corporate relationships. Clients want to do business with a smaller number of people with a broader array of services."

Wachovia also acquired Virginia-based Jefferson Bankshares Inc. for $542 million and Central Fidelity Banks Inc. for $2.3 billion in 1997. Both deals brought Wachovia leadership in the Virginia market with 335 branches and $9.9 billion in deposits. The purchases continued into the late 1990s and included Florida-based Ameribank Bancshare Inc., Interstate Johnson Lane Inc., OFFITBANK Holdings Inc., and Berry, Evans, Josephs & Snipes Inc. The company's buying spree appeared to have paid off--Wachovia's revenues increased 10 percent in 1997 and 15 percent in 1998.

Wachovia entered the new millennium intent on growth. Acquisitions for 2000 included the credit card business of Partners First Holdings LLC, Atlanta-based B C Bankshares Inc., Florida-based Commerce National Corporation, and DavisBaldwin Inc. of Tampa, Florida. The company began to experience problems, however, when loan losses peaked and the U.S. economy faltered. As a result, profits and stock price fell dramatically for the firm. As such, Wachovia was forced to sell off certain assets. Unable to compete among the larger banks formed from the recent bank mega-mergers, it agreed to be acquired by longtime competitor First Union in 2001.

Wachovia-First Union Merger: 2001

In April 2001, First Union made its $14 billion bid for Wachovia. At the time, First Union was facing possible takeover threats and Wachovia's profits were tumbling. As both companies suffered, they eyed the benefits of merging. For Wachovia, a purchase by First Union meant its name would stay intact, and it would have seats on half of the board. That held much weight with the bank, a company known for its rich history and proud heritage. For First Union, an acquisition would bolster its assets to $329 billion, making it a much less attainable takeover target, and position it as the fourth-largest bank in the United States behind Citigroup Inc., J.P. Morgan Chase & Co., and Bank of America Corp.--all of whom were involved in mega-merger activity.

The bid for Wachovia however, was met with opposition from Sun Trust Banks Inc. Sun Trust had originally approached Wachovia in December 2000 about a possible merger. The proposal had failed, but Sun Trust had held onto hope that talks would eventually resume. After First Union made its move in April, Sun Trust launched a $30 million proxy battle in May in an attempt to persuade Wachovia shareholders to reject the First Union bid. All three companies became embroiled in a very public battle that included lawsuits, rival merger applications, and advertising in newspapers, radio, and television that both First Union and Sun Trust used to try to gain shareholder approval. All in all, Wachovia and First Union spent nearly $75 million to fend off Sun Trust. Sun Trust's efforts proved fruitless, and on July 31, First Union shareholders approved the deal. On August 3, Wachovia shareholders followed suit, and the merger was finalized in September 2001. Thompson was named president and CEO, and Baker held the chairmanship.

The merged company kept the Wachovia name and became the largest financial holding company along the East Coast with 19 million customers. While the integrated company reported a third-quarter loss, it posted a 2000 fourth-quarter profit of $730 million. As results of the merger looked favorable, the new Wachovia had yet to prove it would be the success both Thompson and Baker touted it to be. In an investor conference, Thompson described the firm as "on track, on time, and on budget."

Principal Subsidiaries: Wachovia Bank N.A.; Wachovia Securities Inc.; The First National Bank of Atlanta; OFFITBANK; ABCA, Inc.; Capital Finance Group Inc.; Corestates Holdings Inc.; Everen Capital Corp.; First Union Securities Inc.; First American Service Corp.; First Union Commercial Corp.; First Union Community Development Corp.; First Union Development Corp.; First Union FPS Inc.; First Union Genesis Holdings Inc.; First Union Insurance Services Inc.; First Union Investors Inc.; First Union Life Insurance Company; First Union Mortgage Corp.; First Union National Bank; First Union National Bank of Delaware; First Union Private Capital Inc.; First Union Services Inc.

Principal Competitors: Bank of America Corp.; Citigroup Inc.; Sun Trust Banks Inc.; J.P. Morgan Chase & Co.

Chronology

• Key Dates:
• 1879: Maddox-Rucker & Company is formed as a private bank; William Lemly establishes the Wachovia National Bank.
• 1893: Wachovia Loan and Trust Company becomes North Carolina's first charted trust company.
• 1910: Wachovia National Bank merges with Wachovia Loan and Trust to become Wachovia Bank and Trust Company.
• 1968: The Wachovia Corporation is formed as a holding company.
• 1985: First Union merges with Northwestern Financial Corporation to become the state's second-largest bank; Wachovia merges with First Atlantic Corp. to form First Wachovia Corp.
• 1988: First Union lists on the New York Stock Exchange.
• 1991: First Wachovia reorganizes and is renamed Wachovia Corp.
• 2001: First Union and Wachovia merge, forming the new Wachovia Corporation.