First Fidelity Bancorp.'s appetite for acquiring banks and thrifts in the Northeast shows no signs of abating. But insiders and banking experts say that as the New Jersey company continues its expansionist march, regulators will be keeping a close watch to see that it doesn't end up with more than its fair share of the market.

Through more than a dozen acquisitions made over the last two years, the assets of First Fidelity have swelled to $32.2 billion from $29.1 billion. And the bank's top officers say they will continue to be opportunistic as the industry consolidates.

"We can get bigger before we have antitrust problems in New Jersey," Anthony P. Terracciano, chairman and chief executive, said in a recent interview.

But insiders and competitors sax that Lawrenceville-based First Fidelity, which has 625 branches and the largest share of consumer and commercial deposits in many of its New Jersey markets. has already grown so dominant that any sizable instate expansion would catch the attention of the Justice Department and bank regulators.

"They've never come right out and said it," said one First Fidelity insider. "But the regulators have made it clear that we can't get much bigger."

Alfred J. Schiavetti Jr.. chief credit officer at Midlantic Corp., New Jersey's second largest bank, says First Fidelity is the only Garden State bank that has to be concerned with potential antitrust problems.

Room in Tristate Area

To be sure, First Fidelity has plenty of room to grow in the highly attractive suburbs north of New York City and in Connecticut -- markets it recently penetrated. It also can expand in Pennsylvania, where it has a large bank in Philadelphia and 187 branches statewide.

There are even some New Jersey counties -- including Sussex add affluent Bergen in the north -- where First Fidelity has a relatively small market share.

But in 14 of the 21 counties it serves, First Fidelity is either first or second in deposit share, with nearly 20% of the market in each. In Essex County, it holds 30% of deposits. Statewide, the company holds 15.2% of total deposits, up from 10% in 1990.

That's why experts beg to differ with Mr. Terracciano about antitrust issues. Concerns are sure to crop up, they said, when the next spate of bank and seized thrift sales occurs.

"We represented Fleet when it bought Bank of New England. and the Federal Reserve Board ruled then that the benefits of an acquisition of an insolvent institution overrode antitrust concerns, but they've reversed that decision." said Michael A. Greenspan. an attorney at Thompson & Mitchell, a Washington law firm.

He cited a case earlier this year in which the Fed rejected Minneapolis-based Norwest Corp.'s application to acquire a South Dakota thrift from the Resolution Trust Corp. on the grounds that the deal could create anticompetitive results. Another bidder bought the thrift.

"The only time antitrust concerns are overridden is if there are no other bidders," said Mr. Greenspan.

Hard Line

The Justice Department also appears to be taking a hard line against antitrust violations. In some cases the department has looked beyond the Herfindahl-Hirschman index of market concentration, which is based on share of deposits, and is considering market share of separate bank products in determining whether a merger will have an anticompetitive result.

The department rejected Texas Commerce Bancshares' deal for two of five subsidiaries of the failed First City Bancorp. because the Chemical Banking Corp. affillate was already the No. 1 lender to middle market companies and small businesses in the affected areas.

And it had to sell the commercial loans and deposits of a third bank before being allowed to own it, because the Justice Department said Texas Commerce already controlled a dominant share of the market's business.

Unusual Step

"It's the first time I had seen Justice intervene to block the sale of a troubled bank by the FDIC." said Raphael Soifer, an analyst at Brown Brothers Harriman & Co. "The antitrust people were looking at a lot more than just traditional share of deposits."

Justice Department officials could not be reached for comment.

New Jersey has several failed thrifts that will probably be sold once the RTC receives additional funds from Congress.

Several commercial banking companies, such as UJB Financial Corp., Princeton; Summit Bancorp, Chatham; and Collective Bancorp. Egg Harbor City, tare also viewed as takeover candidates.

Softer Stance Seen Possible

In light of the opportunities available, some state banking officials believe federal regulators will soften their stance on antitrust because of First Fidelity's financial strength. Allowing more in-market transactions typically produces greater expense savings, they said.

"It could be that faced with more out-of-state banks coming, First Fidelity will look less threatening," said Jeff Connor, New Jersey's banking commissioner.

He noted that regulators made no objections when First Fidelity last year bought Howard Savings Bank from the FDIC, even though the acquirer already held the largest share of deposits in Essex County. The other bidders were out-of-state banks.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.