Wachovia’s Thompson Forced Out by Board

The board of directors at Wachovia Corp. (WB: 5.15 +43.06%) forced CEO Ken Thompson to retire, the company said on Monday, a move that comes on the heels of an unexpected $393 million first quarter loss and what sources close to the banks said was “discontent” among a number of board members over Thompson’s ill-fated orchestration of option ARM mortgage specialist Golden West Financial last year.

Current chairman Lanty Smith has been appointed interim CEO, the bank said in a press statement; Ben Jenkins, currently vice chairman and president of the general bank, will assume Thompson’s role as Chief Operating Officer on an interim basis.

“Wachovia is a strong institution and well positioned even in the face of the unprecedented conditions in the financial services industry,” said Smith.

“No single precipitating event caused the Board to reach this decision, but a series of previously disclosed disappointments and setbacks cumulatively have negatively impacted the company and its performance.”

Thompson’s demise was likely sealed, insiders told HW, the minute he agreed to purchase California-based option ARM lender Golden West Financial.

So-called “pick-a-pay” loans, Golden West’s specialty, generated $240 million in charge-offs in the first quarter, by far the largest category of credit losses at Wachovia relative to other sectors. Non-performing assets in option ARMs alone rose to 3.55 percent, up dramatically from 2.31 percent just one quarter earlier.

Led by weakening option ARM performance, total non-performing assets — including non-accrual loans and foreclosed properties — surged in the first quarter at Wachovia. Total NPAs reached 1.74 percent of loans, or $8.3 billion, compared to 1.16 percent ($5.4 billion) just one quarter earlier.

Smith has served as a director at Wachovia since 1987, and was lead independent director from 2000 until May 2008, when he became non-executive chairman. He is currently also the chairman and CEO of Tippet Capital, a merchant banking firm headquartered in Raleigh, N.C.

Jenkins joined First Union in 1971, prior to its merger with Wachovia, and has held a number of senior executive positions, including president of First Union in Florida, Virginia, Maryland, Washington, D.C., Georgia and South Carolina.

For more information, visit http://www.wachovia.com.

Disclosure: The author held no positions in WB when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.