As they move to streamline their far-flung branch networks, large banks have made deals with community banks akin to the selling and trading of properties on a Monopoly board.
The bigger banks are seeking to get rid of overly costly, unprofitable, or "nonstrategic" branch offices. Sometimes they are forced to sell branches to allay antitrust concerns about a merger with another bank.
Conveniently, some offices for sale just fill the bill for expansion- minded community bankers.
"I think people are looking at the maps of their franchises and realizing what the core is," said Jeffrey Cohn, bank equity analyst at Buckingham Research Group in New York. "They may have some outliers that may make some sense to divest if the right opportunity comes along."
That's particularly true of the large banks, many of which have driven the wave of branch sales by divesting significant amounts of deposits to satisfy antitrust concerns.
Everyone who deals with branch transactions is finding the wave of sales "to be an interesting addition to our workload," said Arnold Danielson, president of Danielson Associates Inc., a consulting firm in Rockville, Md. "The big banks are getting out of markets where they're small, and the small banks are improving their position."
Banks and thrifts are also doing a little horse trading. In a classic example last year, Waterbury, Conn.-based Webster Financial Corp. picked up branches in Hartford, Conn., divested by Fleet Financial Group while giving its own distant Fairfield County site to Fleet.
Community banks can be sellers, too.
Webster's partner in the Fleet purchase, Bristol, Conn.-based Eagle Financial Corp., sold seven branches to Union Savings Bank, Danbury, Conn., right after buying five others from Fleet.
"Most of the small and midsize banks have caught onto the trend and are taking a hard look at their distribution system," said Eric D. Hovde, executive vice president of Hovde Financial Inc., Washington.
In 1995, banks and thrifts sold about $30.1 billion of deposits in 217 deals, said SNL Securities of Charlottesville, Va. That was the biggest dollar total since SNL started keeping track seven years ago.
So far in 1996, about $7.3 billion of deposits have changed hands in 34 sales.
The average thrift deposit premium during the first quarter was 7.46%, up from 5.7% in 1995, according to investment bank Hovde Financial. Banks' first-quarter average premium was 10.5%, compared to 8.3% last year.
Although deposit premiums may go as low as 1% to 2% in rural or struggling areas, sellers have been encouraged by recent high-priced deals, such as the 10.6% paid in Meridian Bancorp's sale of branches to Commonwealth Savings Bank.
"A lot of people have visions of sugar plums dancing in their heads, with 8% premiums having been paid in some cases, and it hasn't always worked out that way," said Mr. Cohn of Buckingham Research. "At 8% you might be a seller, but where are the buyers?"
The deals also benefit the buyers, usually community banks. Besides filling in gaps in their market coverage, such deals often help community banks leverage excess capital. And in many cases, the market can be better served by the local community bank than by a more distant company with its focus elsewhere.
"What may seem like a nuisance to a large bank could be a great improvement to a small bank that serves that area," said Mr. Danielson, the consultant.
A buyer might see a branch purchase as a way to get into a market in which it is interested, at a cost well below that of building and funding a new branch.
"It's a hell of a lot cheaper to go into an established facility than it is to start one from scratch," said Peter J. Ostrowski, managing director of Ostrowski & Co., New York.
Thrifts in particular have become more aggressive branch buyers as investors in the past year have accepted that expensive purchases can boost earnings despite a temporary dilution of book value, said Emanuel Friedman, principal of Friedman, Billings, Ramsey and Co., an investment bank in Arlington, Va.