Responding to intensifying competition for corporate customers, Southern National Corp. said Thursday that it has struck a deal to buy a Richmond, Va., investment bank.

The pact for Craigie Inc. places $22 billion-asset Southern National among a select group of mid-tier regional banks that have recently added investment banking to their product menu.

Last week, for instance, BOK Financial Corp., a $5.1 billion-asset banking company in Tulsa, received Federal Reserve approval to launch an investment banking unit, Alliance Securities.

These mid-tier banks are feeling the squeeze from bigger regional rivals-including commercial and investment banks-that have begun offering soup-to-nuts capital markets services.

"Over the next 10 to 20 years, if you don't have this expertise, you're not even going to be in the banking business," said R. Harold Schroeder, an analyst with Keefe, Bruyette & Woods Inc.

Terms of Southern National's cash-and-stock deal for Craigie-a 68-year- old firm that concentrates on fixed-income underwriting and advisory work- were not disclosed. But securities experts said investment banks of that size typically command two times book value, indicating a price of around $36 million.

Officials of the Winston-Salem, N.C., banking company said the acquisition-which requires approval from the Federal Reserve Board-would broaden its product line, boost fee income, and stem the loss of customer relationships to competitors.

"We have been in a position where we did not have the full array of products to offer our large, middle-market commercial base of customers as some of our other competitors might," said Burney S. Warren, Southern National's executive vice president in charge of acquisitions. "With this firm, we'll have that capability."

The purchase would also arm Southern National to compete with larger regional rivals NationsBank Corp. and First Union Corp. in corporate and municipal bond underwriting.

Vernon Plack, an analyst with Richmond-based Scott & Stringfellow, spoke highly of Craigie, which has 100 employees. "They do a nice job on the public financing side, but they don't do a lot on the equity side."

More than 90% of Craigie's revenues last year came from fixed-income work. Less than 7% came from equity underwriting, said the firm's chairman, Allen Mead Ferguson. Annually, the company handles management and advisory responsibilities for about $1 billion in tax-exempt financing and does about half that volume each year in taxable finance, company officials said.

Last month, in its biggest deal to date, Craigie served as the lead underwriter for a syndicate handling $153 million in public facilities revenue bonds issued by the Virginia Public Building Authority.

Southern National, which would operate Craigie as an autonomous subsidiary, is asking the Fed for full section 20 powers, including the ability to underwrite equities, said Mr. Warren.

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