1 Union Fidelity: New Customers Seen in Megamerger's Wake

Community banks in the Northeast aren't sure what to expect from their new competitor, First Union Corp., but they're hoping to rake in a pile of new customers disenchanted by First Fidelity Bancorp.'s merger with the Charlotte, N.C., giant.

"There'll be a competitor that has enormous resources and at the moment we don't really know what First Union offers," said Robert M. Meyer, president and chief executive of Midland Bank and Trust Co. in Paramus, N.J. "On the other side of it, every time there's been a rather substantial merger, customers get lost for a while and we tend to benefit."

The megamerger announced Monday will create a $123 billion-asset banking behemoth in Charlotte, with a branch network stretching from Florida to Connecticut. It will be the seventh-largest bank in the country.

For community bankers in First Fidelity's Maryland market, the merged entity isn't going to be a new face because First Union is already there.

"I don't see any range of services that their size is going to have them offer that they didn't offer before," said Jeffrey R. Springer, president of Citizens Bancorp in Laurel, Md.

But their brethren further north remain uncertain about what to expect from their new neighbor.

"It gives you the opportunity to differentiate yourself even more, but it raises the stakes," said Thomas M. O'Brien, president and chief executive of North Side Savings Bank, Floral Park, N.Y. "You've got a bigger player with a national presence, (and) they've got a menu of products and services that I'm sure outstrips most of the typical community bank offerings."

Despite the uncertainty about what First Union will do, bankers agree that any competitive threat won't materialize until the merger is completed and First Union can take full advantage of First Fidelity's network to aggressively market its own expansive product line.

"If First Fidelity is able to adapt the retail banking culture of First Union, it's going to give us a run for our money," said Anthony S. Abbate, president and chief executive of Interchange Financial Services Corp. in Saddlebrook, N.J. "But in the intervening period it will create opportunities."

The prospect of luring customers away from First Fidelity is what has community bankers pumped up about the merger.

"Community bankers are enthusiastic," said Charles F. Howell, president of the Fairfield County (Conn.) Bankers Association and executive vice president and chief operating officer of the Norwalk Savings Society. "The larger the banks become, the more opportunities there are for the community bankers."

The small bankers believe the merger, valued at $5.4 billion, will alienate customers, particularly the small businesses that want more personal attention from their bankers but don't feel they'll get it from a superregional.

"There's a whole segment of the business community as well as the retail community that's looking for a local bank, and the more these guys buy and the bigger they get, the more they remove themselves from the local market and from really knowing what the local market wants," Mr. Springer said. "There's a certain discomfort that the local business guy has from knowing that the decisions are being made elsewhere."

That will leave the community banks "serving a niche that some of these multibillion-dollar holding companies wouldn't be interested in, such as the small to midsize businesses," Mr. Howell said.

And although First Fidelity itself is a $35.4 billion-asset giant based in New Jersey, its purchase by a North Carolina institution might further irritate customers in New York and Connecticut who see the executives moving further away.

"There's been such change that customers who have banked with banks for many years are seeing new checks mailed to them every other year," Mr. Howell said. "Many of the local customers feel they've lost the continuity and they've lost the long-term relationship they had with individual bank officers who served in the local banks."

The megamerger is also expected to increase the pressure on the medium- size regional institutions to merge with each other to survive the industry consolidation among the larger banks, observers say.

"The banks that are very vulnerable right now are the regional banks," Mr. Howell agreed. "The ones that have grown beyond a community bank and just don't have that same identity, yet don't have the size to compete with the superregional banks."

But "the community franchises will remain independent (because) they provide a different kind of banking service than do the large regional players," said Charles H. Meacham, president and chief executive of Commonwealth Savings Bank in Valley Forge, Pa.

"There will obviously be some fallout from this in terms of rush to merge," Mr. Meyer said. "But there should be plenty of opportunity for those of us who wish to remain independent."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER