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Wachovia Bank — the fourth largest bank in Maryland in deposits — could be split between Citigroup and Wells Fargo & Co., as the two latter banks battled this week for the right to purchase the struggling institution.

Meanwhile, bank deposits in Maryland grew by only 1.7 percent to $96.6 billion from June 2007 to June 2008, the weakest growth since 1996, when deposits fell slightly, according to Federal Deposit Insurance Corp. figures released Wednesday. The state growth rate was below the national average increase of 4.8 percent.

Early last week, Citigroup and Wachovia executives said the New York company had agreed to purchase the banking operations of the Charlotte, N.C., institution for $2.2 billion in a deal facilitated by the FDIC. Later in the week, Wachovia and Wells Fargo executives said they agreed to a $15.1 billion acquisition of the entire Wachovia business in a transaction not involving the FDIC.

This week, Citigroup filed a lawsuit in New York seeking more than $60 billion in damages against Wells Fargo and Wachovia for allegedly breaching an exclusivity agreement. Bank executives, consulting with the Federal Reserve, agreed to a legal truce that expires at 8 a.m. today to try to work out a compromise.

The compromise could include Citigroup and Wells Fargo carving up Wachovia's branches, according to published reports. Wachovia Corp. was the third largest U.S. bank holding company in deposits with $422 billion as of June, behind only Bank of America and JPMorgan Chase. 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, with much of the loss due to bad loans.

In Maryland, Wachovia has $7.5 billion in deposits in 81 branches. Only Bank of America, PNC Financial Services Group and Chevy Chase Bank have more deposits in the state.

Wachovia executives said this week in a statement that they believe the agreement with Wells Fargo was "proper and valid." The deal was also in the "best interests of shareholders, employees, creditors and retirees, as well as the American taxpayers, and it imposes no risk to the FDIC fund," they said.

In their own statement, Citigroup executives said their buyout plan last week effectively saved Wachovia from failing, "with potentially devastating implications for the stability and security of the financial markets." Citigroup agreed to the FDIC's request to "rescue" Wachovia "after Wells Fargo walked away from Wachovia," they said.

"The Citi/Wachovia transaction would have been signed and announced on Friday, Oct. 3, if it had not been subverted by the unlawful conduct of Wachovia, Wells Fargo and their officers and directors and outside advisors," Citigroup executives said. "Wachovia's agreement to a transaction with Wells Fargo is in clear breach of an exclusivity agreement between Citi and Wachovia."

Wells Fargo executives disagreed, saying they had a "firm, binding merger agreement with Wachovia." That transaction provided better value to Wachovia shareholders, they said.

FDIC Chairwoman Sheila C. Bair said in a statement that Wells had "apparently reassessed its position and come forth with this new offer that does not require FDIC assistance." But the FDIC "stands behind its previously announced agreement with Citigroup," Bair said. "The FDIC will be reviewing all proposals and working with the primary regulators of all three institutions to pursue a resolution that serves the public interest."

Citigroup is the 12th largest bank in Maryland with deposits of $1.4 billion in 16 offices. Wells Fargo has a commercial business office in Baltimore and other mortgage offices in the state.

Bank of America grows in state but income drops

Bank of America, also of Charlotte, solidified its top position among banks in Maryland in the past year, as deposits in the state grew 6.5 percent to $18.5 billion, according to the FDIC. Its Maryland market share of 19.2 percent almost doubles that of its closest rival, PNC of Pittsburgh, which saw deposits drop by 11 percent in the previous year to $9.6 billion.

Bank of America was among the first banks to issue its third-quarter financial report this week, which showed net income dropping by 68 percent to $1.2 billion from a year ago. CEO Kenneth D. Lewis said the current environment was the most difficult he had seen in his 39 years in the banking industry.

Bank of America plans to sell common stock to raise $10 billion in capital, and executives announced a dividend reduction to add capital. "We believe it is prudent to raise capital to very substantial levels in this uncertain environment," Lewis said in a statement.

Most other banks among Maryland's top 17 saw deposits increase in the past year, including Provident Bankshares Corp. of Baltimore rising almost 8 percent to $3.5 billion. But SunTrust Banks of Atlanta, Sandy Spring Bancorp of Olney and Fulton Financial Corp., the parent of Columbia Bank and others, reported falling deposits.

Provident has been able to grow in Maryland by deepening relationships with existing clients, having the same services as larger banks and maintaining the local touch, said Stephen K. Heine, its executive vice president for consumer and business banking.

"We have the expertise of the larger banks, and yet we're local," Heine said.

Wachovia saw its Maryland deposits remain flat this year, although they dropped in Montgomery County. Wachovia fell in the county from the top spot last year to the third largest bank, behind Bank of America and SunTrust.

Montgomery County continued to boast more deposits than any other Maryland jurisdiction with $24 billion. But its state market share declined slightly to 24.8 percent from 25.2 percent in 2007.

Baltimore City and County saw their Maryland market share increase, while deposits declined in Prince George's, Howard and Frederick counties.

Bank of America solidified its position with the most deposits in Maryland, growing faster than most of the other 16 largest banks in the state. Last year's overall growth in bank deposits was the slowest in more than a decade and slower than the national jump.