Deal Makes Wachovia a Player

Wachovia Corp. here has agreed to purchase mega-thrift Golden West Financial Corp., Oakland, Calif., for $26 billion in cash and stock, an acquisition that will catapult the bank into the upper echelons of residential servicing.

Once the sale is completed, the combined institution will rank squarely among the top 10 in residential servicing and production, according to figures compiled by Mortgage Servicing News and the Quarterly Data Report.

Wachovia is already the second largest commercial servicer in the U.S.

The sale of GWF caught some in the industry by complete surprise, while others have speculated that it was just a matter of time before the thrift's co-CEO's, the husband and wife team of Herbert and Marion Sandler, decided to exit the business.

The Sandlers, icons of the savings and loan industry, are both in their mid-70s. Until a few years ago, GWF's thrift affiliate, World Savings, didn't even have ATM machines, a situation that had some equities analysts scratching their heads.

GWF/World has 283 thrift branches in 10 states and lending operations in 39. The company was incorporated in 1959 and is currently the nation's second largest thrift, behind Washington Mutual of Seattle.

Wachovia has a relatively small servicing portfolio ($38 billion), ranking 25th nationwide, according to MSN. GWF ranks 11th in servicing. (Combined they will rank 10th.) Among banks, Wachovia ranks fourth in terms of mortgage holdings.

Over the past few years the Charlotte-based bank has shown a growing appetite for mortgages - and bank acquisitions.

GWF has been a pioneer in ARM lending and servicing, and is a top funder of payment-option ARMs, a somewhat controversial product. (GWF executives have always maintained that when it comes to POAs, it conservatively underwrites the product. Its low delinquency rate reflects this.)

In a research report, Sandler O'Neill analyst Kevin Fitzsimmons notes that Wachovia is paying "full price" for the thrift but is also bolstering its presence in California, the nation's most populous state. The analyst says the deal will make Wachovia "a national mortgage player overnight."

John Robbins, chairman and chief executive of American Mortgage Network, San Diego, said that Wachovia is "very good" at integrating acquisitions.

Mr. Robbins should know - Wachovia bought AmNet late last year. From his point of view, the acquisition of his mortgage company was "relatively seamless."

Wachovia, said Mr. Robbins, is "very intelligent" about how they bring companies into the fold.

Brad Finkelstein also contributed to this report.

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