Atlantans lose big in Wachovia stock dive

The current price of Wachovia Corp. stock is causing investors to fret over their holdings in the financial giant.

Longtime holders of the bank’s stock have seen its value sink to levels they never imagined.

That’s significant because Charlotte-based Wachovia is the second-largest bank in metro Atlanta in terms of deposits. It commands a 19 percent market share, second only to Atlanta-based SunTrust Banks, according to federal data. Wachovia employs more than 5,000 people in the Atlanta area.

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Atlanta’s investment in Wachovia stretched across individual portfolios and large institutional investors.

Until recently, Atlantans were on Wachovia’s board of directors and stock ownership came with the position.

Among those former board members is Herman J. Russell, founder and chairman of H.J. Russell & Co. “A lot of us stand to lose a lot of money,” said Russell, who declined to say how much Wachovia stock he owns. Russell, at various times, served on Wachovia’s board, and the board of a subsidiary, from 1983 until 1998. “This is a very serious situation.”

U.S. Securities and Exchange Commission filings identified four other notable Atlanta businessmen who served on Wachovia’s board: F. Duane Ackerman, James S. Balloun, John L. Clendenin and Robert M. Holder Jr.

Attempts to reach these former board members for comment were unsuccessful.

Wachovia’s stock price has been particularly volatile since Citigroup Inc. agreed Sept. 29 to buy its banking assets for $2.1 billion in a deal brokered by the FDIC. In a surprise turn of events, Wells Fargo announced four days later that it had agreed to acquire Wachovia in a deal worth approximately $15 billion. Wells Fargo’s deal did not require any government support. The battle quickly worked its way into state and federal court before Citigroup dropped its bid to buy Wachovia Oct. 9. Citigroup still vowed to fight Wells Fargo in court, alleging breach of contract.

The day Citi and Wachovia announced a deal had been reached, Wachovia’s stock price closed at $1.84, down 81 percent from the $10 closing price on the previous Friday. A week earlier, the stock closed at $18.75. Since the announcement, closing prices have ranged from $3.50 to $6.21 per share. The stock traded for upward of $50 a year ago.

Corporate investors have also been affected. An Atlanta-based life insurance company founded by businessman J. Mack Robinson suffered a multimillion-dollar loss as Wachovia stock fell. About 43 percent of Delta Life Insurance Co.’s assets were invested in Wachovia common shares as of Dec. 31, according to state insurance officials.

Hilton Howell, Delta Life’s executive vice president, said in a recent interview that the insurer remained strong but that the company has “lost tens of millions.” The Robinson family is voluntarily contributing $10 million in assets to the company, Howell said this month. In early October, the company owned about 890,000 Wachovia shares.

Until recently, Robinson was the largest individual shareholder in Wachovia, which bought the bank company First Atlanta in the mid-1980s. Robinson was a major shareholder at First Atlanta, but is no longer the biggest Wachovia shareholder. He still has a substantial holding in Wachovia, said Howell, though he added he did not know the exact number of shares.

Academics and financial experts say stock losses can take investors by surprise for several reasons. One reason is company history.

Wachovia was known as “such a solid institution,” said Don Sabbarese, director of the Econometric Center at Kennesaw State University. “My guess is Wachovia was a much different place when a lot of these investors bought stock.”

Many in the financial industry cite Wachovia’s 2006 acquisition of California-based Golden West Financial, and its thrift World Savings, as the beginning of the end. The deal, which cost more than $24 billion, saddled Wachovia with about $122 billion in option adjustable-rate mortgages. Delinquencies and defaults on these types of mortgages have skyrocketed nationally in recent months, causing big losses.

Wachovia’s share price began to slide in late 2006 after the Golden West deal, and never fully recovered.

There are a number of reasons investors may have held on to the stock, even after the share values continued to fall, said Dorsey Farr, a partner at the Atlanta-based investment and wealth advisory firm French Wolf & Farr. For some, there are tax or other financial implications that cause some investors to hang on longer than others, he said.

“And up until recently the stock paid a nice dividend,” Farr said. “People are aware of the things that can go wrong, but because of an attachment to the company or stock, they have trouble understanding it could happen to them.”

William T. Deyo Jr. is among those who stand to lose if Wachovia’s stock stays down. The former officer with the Wachovia Bank of Georgia, a wholly owned subsidiary of Wachovia Corp., retired from his bank post in 1999. He is now a principal of Goddard Investment Group LLC, an Atlanta-based real estate investment firm. He still owns Wachovia stock, though he wouldn’t say how much.

“I will tell you my investment was certainly more sizable 12 months ago,” he said. “My grandchildren’s college fund has now turned into their pre-kindergarten fund. That’s where we are right now.”

— News researcher Sharon Gaus and The Associated Press contributed to this article.

BOARD MEMBERS’ HOLDINGS, THEN AND NOW

A sampling of former board members’ holdings in Wachovia stock as listed in company financial reports. Dates are the closest available to their retirement from the board:

*Not including restricted shares reserved for non-employee directors and units held under a deferred stock unit plan

Source: Company filings, Bloomberg News and Morningstar