In agreeing to buy First Fidelity Bancorp. in the biggest bank deal in U.S. history, First Union Corp. may also have committed its future to the Northeast.
As recently as last winter, Charlotte, N.C.-based First Union had been looking westward. Its aborted bid for Compass Bancshares in Birmingham, Ala., rejected by the Compass board, would have given First Union a toehold in Texas and opened up a vista of further opportunities in the West or Midwest.
Now, with the First Fidelity deal, First Union seems committed to strengthening and perhaps extending a franchise that will stretch from Florida to Connecticut. At Monday's press conference, the top executives of First Union and First Fidelity clearly suggested they would pursue further acquisitions in the Northeast, though not immediately.
Anthony Terracciano, First Fidelity's chairman and chief executive, who will become president of the combined company, said the six-state First Fidelity territory still contains 888 banks and thrifts with less than $1 billion in assets. Sixty-three are in the $1 billion-to-$5 billion range, and 21 are over $5 billion.
"The point of that is the Northeast and Middle Atlantic haven't really gone through the level of consolidation of some other parts of the country," Mr. Terracciano said. "So there's significant opportunity there for further consolidation, which means we have significant opportunity for further in-market transactions."
First Union president John R. Georgius, slated to be the new company's vice chairman, pointed to First Union's strategic expansion in Florida as a model for what might happen in the Northeast. Since 1985, when it bought Jacksonville's Atlantic Bancorp, First Union has layered one acquisition on top of another - 33 in all - to create a $31 billion-asset bank in Florida, the state's second largest.
"I think the same sort of thing is going to happen in this transaction," Mr. Georgius told reporters assembled at New York's Inter-Continental Hotel. "We get a foothold in a new market and over time we supplement that with other types of purchase transactions."
Of the seven states in which it operates, First Fidelity enjoys a dominant position in only one, New Jersey, leaving lots of room for further growth, particularly in New York, Pennsylvania, and Connecticut.
"What First Union is looking for is population density, and you really get that up on the eastern seaboard, from D.C. all the way to Boston," said George A. Bicher of Alex. Brown & Sons. "It makes sense, to get the most population bang for your buck, to go all the way up to Boston."
First Union's march northward across the Mason-Dixon line does carry some risk. The Northeast endured a punishing recession in the early part of the decade, and economic growth remains sluggish compared to the faster- growing states in First Union's own southeastern franchise.
The decline in First Union's stock price since Monday's announcement suggests market skepticism of First Union's projections for revenue growth in 1996 and beyond. First Union said the combined company would earn $6.31 a share next year, but that depends on moving more product - both commercial and retail - through the First Fidelity distribution system.
If First Union cannot deliver on its promises, Edward E. Crutchfield Jr.'s own words might come back to haunt him.
"Size can be our enemy," the First Union chairman and CEO wrote in the company's 1994 annual report. "The only real fear I have about our continued success is that we will begin acting like a lumbering giant, with a bloated bureaucracy out of touch with our customers and our employees.
"Companies that stop listening to their customers and employees will not survive."
At the time First Union was the nation's ninth-largest bank, with $77.3 billion of assets. By next year's first quarter, when the First Fidelity deal is to close, it's to be sixth largest, with 60% more assets, and have more branches - 1,972 - than any other U.S. bank.
