Big banks usually buy into a new market only if they can grab significant market share. But last month New Jersey-based First Fidelity Bancorp defied the conventional wisdom.

The banking company, with $29.2 billion in assets, entered the tough New York market by acquiring five branches of the failed American Savings Bank. But the branches, in affluent areas of the Bronx and Westchester County, hold a scant $335 million in deposits.

Why bother? Why not, responds First Fidelity.

For one thing, the bank says, the areas are a natural extension of its marketplace. Their demographics are similar to those of New Jersey's upscale Bergen County, one of Fidelity's primary service areas. "It's suburban New York, and that's our type of market," says Wolfgang Schoellkopf, the company's vice chairman and chief financial officer.

What's more, Fidelity got the branches for a song; it paid a premium on deposits of about 1%.

Though the company must operate the branches as a separate subsidiary, Mr. Schoellkopf says, operations would be run on Fidelity's existing computers and would not require a lot of additional marketing or personnel costs. "We put on new signs and take out advertisements in the local paper and that's it," he says.

A Question of Size

Still, analysts remain puzzled. They question why a company the size of Fidelity would bother taking the staff time to research such an insignificant purchase.

"I'm not sure what it does for them," says Dennis Shea, an analysts at Morgan Stanley & Co."

If Fidelity wanted to expand into New York, he says, it would have made more sense to acquire banks in Rockland County, which abuts New Jersey, or even Manhattan, where it could snare Garden State commuters.

Mr. Shea and others speculate that First Fidelity does plan to make other acquisitions in New York.

Mr. Schoellkopf acknowledges that Fidelity will look at other banks, but insists that further expansion is a "secondary" consideration.

This deal "is not a humongous thing, but it's incrementally positive for us," he says. "What's wrong with that? Who says we always have to do huge deals?"

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