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Expect more acquisitions in the mode of this week's sale of Wachovia Corp., the Charlotte, N.C., parent of Wachovia Bank and the fourth largest bank in Maryland in deposits, analysts say.

"These are the dark ages for a lot of banks," said Bethesda banking consultant Paul Joegriner, a former executive with Chevy Chase Bank and American Partners Bank. "Once the dust has settled, what we will see in the future is strategic acquisitions of banks with solid core deposits and an established franchise."

He expected Wall Street investment banks Goldman Sachs and Morgan Stanley to go on acquisition binges for core deposits after recently being converted to bank holding companies with coverage by the Federal Deposit Insurance Corp.

It may be a while, however, before the dust settles, as Congress wrangles over the Bush administration's $700 billion financial-markets rescue package and Wall Street and global markets continue their roller-coaster ride. The Senate passed a bill late Wednesday that would buy bad assets from financial institutions, raise the FDIC caps on bank deposits to $250,000 from $100,000 and allow for tax breaks for energy and technology companies.

The House, which rejected a similar bill Monday, may consider the Senate's version today.

The deal to have Citigroup of New York purchase Wachovia for about $2.2 billion in stock was facilitated by the FDIC, but officials emphasized that Wachovia did not fail. "There will be no interruption in services, and bank customers should expect business as usual," FDIC Chairman Sheila C. Bair said in a statement.

Wachovia has deposits of $7.5 billion in 79 branches in Maryland, according to the FDIC. Citigroup is the 12th largest bank in Maryland with deposits of $1.3 billion in 16 offices.

Joegriner said the acquisition could elevate Citibank to second largest behind only Bank of America Corp. But he said he didn't think it provided "any real benefit" to small businesses in Maryland.

"Citibank's commercial loans account for 12 percent of its total assets nationally," Joegriner said. "Whereas a local bank, such as EagleBank, its commercial loans account for 16 percent of its assets. What that means for a local business is that it is better to have dealings with your local community bank than a larger national bank because more capital is injected into the local community by way of loans and services to that business."

Wachovia Corp. will remain a public company, retaining its asset management and retail brokerage subsidiaries, along with parts of its wealth management businesses. Executives did not know whether branches would be consolidated, although there is "very little" overlap between Wachovia and Citigroup branches nationwide, said Mary Eshet, a spokeswoman for Wachovia.

"It's very early in the process," Eshet said.

Wachovia lost $1.7 billion in the first half of 2008, after seeing net income of $3.2 billion in the same period last year, according to FDIC data. Much of Wachovia's problems stemmed from bad loans, as Citigroup will absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio.

Provident Bankshares Corp., the Baltimore parent of Provident Bank and the largest publicly traded bank headquartered in Maryland with more than $6 billion in assets, has seen business and consumer deposits come in from former Wachovia customers, said Lowell Yoder, senior vice president and division head of Provident's Greater Washington commercial banking group.

"We have seen a flurry of activity this week," Yoder said. "Probably, some people were thinking about switching before this week, after hearing reports. Then when the announcement came this week, they acted."

Provident targets middle-market companies, while Citigroup goes after a lot of large global businesses, he said. With a conservative lending philosophy, Provident remains in good shape and has been making loans as usual, Yoder said.

"Our lending window is clearly open. We have no liquidity or capital issues that would restrict that," Yoder said. "The way we underwrite credit hasn't changed much. We were conservative before, and that has served us well in the present environment."

The percentage of net charge-offs — the loss banks take when borrowers default — to loans at Provident in the second quarter this year was 0.31 percent, significantly below the national average of 1.16 percent, according to the FDIC. Wachovia's percentage of net charge-offs in the second quarter was 0.86 percent.

PNC Financial Services Group, the Pittsburgh parent of PNC Bank, which has the most branches in the state and the second most Maryland deposits with $10.7 billion, has also seen its business increase lately, said Gina Villiotti, a PNC spokeswoman. In July and August, the bank opened 35 percent more checking accounts than in the same months in 2007, she said. Total deposits in June were up by 26.5 percent from a year ago to $81.2 billion, according to the FDIC.

While not specifically mentioning Wachovia, the growth includes customers switching from other banks, Villiotti said.

Pessimism among Maryland's small and mid-sized business owners has risen, according to PNC's economic outlook survey released Thursday. Some 27 percent of Maryland business executives surveyed in July and August said they were pessimistic about their own company's prospects during the next six months, compared to 25 percent last spring and 13 percent a year ago.

Only 34 percent expected sales to increase in the next six months, down from 42 percent in the spring. Some 29 percent expected revenue to decrease, up from 19 percent in the spring.

For Wachovia, the Citigroup deal was the "best alternative," enabling a resolution for the troubled Golden West Financial Corp., a mortgage lending business Wachovia acquired in 2006, Robert K. Steel, CEO and president of Wachovia, said in a statement. "During recent weeks, the financial landscape has changed significantly and presented us with unprecedented challenges," he said.

For Citigroup, the purchase gives the institution greater reach through Wachovia's extensive network of banking branches, CEO Vikram Pandit said in a statement. "It will augment our access to stable funding and liquidity, and will accelerate our efforts to establish Citi as the world's leading global financial institution," he said.

The Wachovia-Citigroup deal, which is expected to close by the end of the year, was approved by boards of both institutions and requires approval from regulators and shareholders. Citigroup plans to base the retail bank in Charlotte and the investment bank in New York.

Good time to start a bank, consultant says

Despite the leaner times, this is a good time to start a bank, Joegriner said. "Local communities are better off by starting new community banks so that fresh capital can be dispersed into the community," he said.

Successful businessmen should reach out to seasoned bankers to start new commercial banks in their community, Joegriner said. "That's the best way to help local business grow, especially in this cycle," he said.

In bank failures such as last week's shutdown of Washington Mutual Bank of Henderson, Nev., deposits are insured by the FDIC up to $100,000 per bank and up to $250,000 for retirement accounts. Washington Mutual, which has $307 billion in assets, does not have any bank branches in Maryland.

So far this year, 13 banks have failed nationally, the most in one year since 13 closed in 1994 and 42 shut down in 1993, FDIC data says. The last bank based in Maryland to fail was the former Universal Bank of Lanham in 1992, according to the FDIC.

The FDIC had 117 banks on its list of "problem banks" that have low supervisory ratings, based on factors such as earnings, liquidity and capital, in the second quarter. That was up from 90 in the first quarter and was the most in a quarter since 2003.

Since 1982, about 87 percent of the institutions on the problem list have been acquired or returned to sound shape, FDIC officials said.

Staff Writer Steve Monroe contributed to this report.