Darrell G. Knudson is at a crossroads.

Chairman and chief executive of Fourth Financial Corp., Wichita, Mr. Knudson is astride an institution that long ago became the largest banking company in Kansas -- and is reaching market share limits in most towns it serves.

Now that out-of-state banks are allowed to make acquisitions in his home turf, analysts say, Mr. Knudson has two choices: grow through acquisitions outside Kansas or risk being taken over by a new market entrant.

And though he does not rule out a takeover, for now Mr. Knudson plans to be the hunter instead of the hunted.

"We will be making selective acquisitions in new interstate geographies," said the 54-year-old executive, who is also scouting for any overlooked niches in Kansas.

Mr. Knudson can't assume that his acquisition campaign will take off before a buyout offer crosses his own desk. Experts say Boatmen's Bancshares Inc., St. Louis; Commerce Bancshares Inc., Kansas City, Mo.; and others are prowling in Kansas and are strong enough to take on $4.1 billion-assets Fourth Financial.

Borders Opened to Six States

These predators are but the vanguard of companies that gained access to Kansas on July 1. State lawmakers opened the borders to banks in Arkansas, Colorado, Iowa, Missouri, Nebraska, and Oklahoma. To date, Nebraska and Missouri banks have crafted deals.

Fourth Financial would be a prize, analyst say. The bank boasts 11% of the state's deposits (the limit is 12%). For the first half of the year, it posted earnings of $20.1 million, a 0.98% return on average assets, and an 11.92% return on equity.

"I don't know of many organizations much stronger than Fourth Financial. [An acquirer] would have to be a real blue-ribbon-type company," said bank consultant Jerry Swords, president of Swords Associates Inc., Kansas City, Mo.

Bank Seen Bound for Oklahoma

Fourth Financial, which has grown by making more than 30 acquisitions since 1985, is likely to move into nearby northern Oklahoma and the lucrative Kansas City, Mo., market, according to analysts.

Furthermore, a $100 million stock offering completed in the first quarter has given Mr. Knudson the financial means for a shopping spree in neighboring states.

Separately, Mr. Knudson is exploring ways to expand further in Kansas. By pushing for a reform of the limit on deposits and by expanding fee-based services, such as stock brokerage, Mr. Knudson will compete head on with banks entering his territory. "To the degree that we do a good job for our customers, the likelihood of someone taking those customers away is not real high."

First Bank System Veteran

Though fairly new to Fourth Financial, Mr. Knudson is no newcomer to the takeover game. He worked for First Bank System Inc. for over 30 years, starting out as a teller and working his way up to vice chairman and temporary chief executive. The experience of presiding over an acquisitive interstate behemoth may come in handy as he looks to new markets.

But competition could turn into cooperation, given the right conditions. And Mr. Knudson makes it clear that one of his main goals is to "create value" for shareholders.

"If somebody comes along and puts an attractive premium on top of what would be a fairly attractive price, the shareholder wins -- with us or that way as well."

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