A merger plan announced Monday would create a company ranking sixth in deposits in the Charlotte, N.C., area.

HFNC Financial Corp., with $980 million assets, would be merged into $776 million-asset First Charter Corp. of Concord, N.C., in a $241 million stock swap. The transaction would be tax free for HFNC shareholders and accounted for as a pooling of interests.

The combined company would have $900 million of deposits, 5.2% of the metropolitan Charlotte total. All the companies with more are North Carolina-based large banks -First Union Corp. and NationsBank Corp. of Charlotte, BB&T Corp. and Wachovia Corp. of Winston-Salem, and CCB Financial of Durham.

First Charter owns First Charter National Bank and Bank of Union, with 23 branches in all. HFNC owns Home Federal Savings and Loan Association, with 10, eight of them in Charlotte. Home Federal would be absorbed into First Charter National. There is little overlap, First Charter said, though one branch might be closed.

First Charter officials said HFNC's retail and mortgage operations would complement their own expertise in commercial and consumer lending. "We will have the presence to better compete for a greater share of Charlotte's small-business and consumer dollar," said Lawrence M. Kimbrough, who would remain president and chief executive officer of First Charter.

Charles Whittman, an analyst with Wheat First Securities Inc., praised the deal, saying the combined entity would gain a prominent position in the metropolitan Charlotte region.

"This was a key move for First Charter," said Mr. Whittman. "They've done a great job of building up a franchise around the perimeter of the city."

Mr. Whittman added that the deal would improve the liquidity of First Charter's stock and increase its daily trading volume.

The one challenge facing First Charter, he said, would be putting HFNC's excess capital to work. The thrift company converted from mutual ownership in December 1995.

H. Joe King Jr., 66, HFNC's chairman and CEO, would be named chairman of the combined entity next year. All HFNC board members would also join First Charter's board.

The transaction is subject to regulatory and shareholder approval. Shareholders are expected to vote on the agreement by October, and the deal to close in the fourth quarter.

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