Wachovia Corp. lost $8.86 billion in the second quarter, slashed its dividend and said yesterday it would eliminate 10,750 positions, laying off 6,350.

"The Wachovia situation is serious in terms of stockholders and employees who will lose their jobs," said banking expert Neil Murphy, professor emeritus at Virginia Commonwealth University. Deposits are safe, he said.

The job cuts will be made across the country, although mostly in the mortgage-related business, said bank spokeswoman Christine Shaw. In that line of business, the bank did not have a big presence in Virginia.

"We don't have any specific details about the local impact at this time," she said.

Wachovia also said it will eliminate 4,400 open positions and contractors. The bank already has cut 2,000 retail mortgage jobs.

The Charlotte, N.C.-based company, the fourth-largest U.S. bank, employs 120,000 people nationwide. In the Richmond area as of Jan. 1, it employed the equivalent of 5,345 full-time people.

It is one of the largest employers in the Richmond area and has the largest market share of banks here (25.5 percent) and in Virginia (20.7 percent).

Wachovia's earnings results were worse than analysts expected.

"Cutting the dividend is the cheapest way to increase capital," Murphy said. "Shareholders will not be happy."

The dividend will shrink from 37.5 cents to 5 cents a share, saving $700 million of capital per quarter. In April, Wachovia cut the dividend 41 percent.

At least 17 U.S. financial firms have sliced dividends this year as bankers try to recover from losses, Bloomberg News reported.

Shares rocketed 27 percent higher, closing at $16.79, up $3.61.

Depositors do not need to worry, Murphy said. However, "if you have more than $100,000 in any bank, you should be doing due diligence."

The Federal Deposit Insurance Corp. insures up to $100,000 per depositor per bank.

The FDIC expects to record $4 billion to $8 billion in losses from the recently failed California-based IndyMac Bank, one of the largest U.S. mortgage lenders.

It said it does not expect to take over another failed bank of that size or larger. However, 90 financial institutions are on a list of FDIC problem banks, up from 76 at the end of 2007.

"The question is, how did it get so bad so fast?" Murphy said. Banking reforms in the early 1990s were put in place to spot trouble early in the process.

Unlike IndyMac, Wachovia is diversified, Murphy said. It has a big branch network, corporate accounts, deposit accounts and big consumer deposits.

Virginia Banking Commissioner E. Joseph Face Jr. said he has no supervision over national banks such as Wachovia. However, the 83 state-chartered banks that he supervises are healthy.

"Virginia state-chartered banks are well-capitalized and have strong management teams," Face said. "They are in a position to weather any storms."

The only state bank in trouble is First State Bank in Danville. It is under regulator watch, but it is taking corrective action and it will not fail, Face said.

As part of an effort to focus on more core lines of banking business, Wachovia said this week it will exit the wholesale mortgage business. Other banks have gotten out of the business, including Bank of America, which left about a year ago as the housing market continued to slow.

The wholesale mortgage business involves mortgage brokers who shop for consumer loans among various lenders. Beginning Friday, Wachovia will no longer offer mortgages through brokers.

Wachovia will still make mortgage loans to consumers at branch offices. Those loans will be made only in areas where the bank has branches.

"It is prudent to exit from business lines that are not consistent with the core product line," Murphy said.

Mortgage brokers are dropping out of the business in large numbers.

The number of licensed mortgage brokers in Virginia has dropped to 1,350 yesterday from 1,580 at the end of 2007, according to the State Corporation Commission's Bureau of Financial Institutions.

Contact Carol Hazard at (804) 775-8023 or chazard@timesdispatch.com.