301 N. Main Street, Box 3099
Wachovia Corporation is a southeastern interstate bank holding company with dual headquarters in Atlanta, Georgia, and Winston-Salem, North Carolina. Wachovia's principal subsidiaries are Wachovia Bank of Georgia, Wachovia Bank of North Carolina, and Wachovia Bank of South Carolina. Each of those principal banks boasts a heritage dating back more than a century. Together the corporation's member companies operate approximately 500 banking offices in more than 200 cities and communities and offer personal, corporate, trust, and institutional financial services for regional, national, and international markets.
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."
In addition to its size and financial stability, Wachovia is characterized by its diversification and balance of business lines, geographic markets, and credit exposures. Major corporate and institutional relationships of the company's banks outside the southeast are managed by Wachovia Corporate Services. Through its banking subsidiaries, Wachovia also has international representative offices in New York, London, and Tokyo, representative offices at Grand Cayman, and an Edge Act bank branch and domestic corporate service offices in Chicago and New York City. The company operates residential mortgage offices in Florida, Georgia, North Carolina, and South Carolina; a major credit card operation in Delaware; and a credit life and accident insurance company in Georgia. Other financial services that help diversify the company include underwriting for state and local government securities, discount brokerage, sales and trading, foreign exchange, corporate finance, and other money market services.
Several specialized divisions help Wachovia manage its diverse array of financial services. Wachovia Trust Services, Inc. provides fiduciary, investment management, and related financial services for corporate, institutional, and individual clients throughout the total organization. (The three main bank divisions serve corporate customers in their home markets, as well.) Wachovia Operational Services Corporation provides centralized information processing and systems development services for Wachovia's subsidiaries.
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.
Though its three principal subsidiaries were secured under one common parent company by the mid-1990s, each bank remained a separate legal entity with its own board of directors, management, and staff. Moreover, each of the three principal banks was invested with a long history of its own, adding yet another layer of complexity--and interest&mdashø 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, didn't 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 had merged 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 and who became known for his hard work and initiative. Under Conner, 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 eight to ten 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 12th 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&mdash′ompted 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 Q 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 21st 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 institution 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--but that also acknowledges uncertainty in a volatile and quickly changing industry.
Principal Subsidiaries: Wachovia Bank of North Carolina, N.A.; Wachovia Mortgage Co.; Wachovia Bank of Georgia, N.A.; The First National Bank of Atlanta (Delaware); Wachovia Bank Card Services, Inc.; Financial Life Insurance Co. of Georgia; Wachovia Investments Inc.; Wachovia Bank of South Carolina, N.A.; South Carolina National Corp.; Southern Provident Life Insurance Co.; Atlantic Savings Bank, FSB; Wachovia Corporate Services, Inc.; Wachovia Operational Services Corp.
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