but the current surge in stock prices could portend a revival.

A modest $8.1 billion worth of combinations was announced in the third quarter, according to the latest American Banker compilation of M&A transactions. (See tables beginning on page 22.) That's down sharply from $24 billion in the year-earlier quarter. And in stark contrast to the megamergers of last year, the largest was the $2 billion agreement by Dime Bancorp of New York to acquire Hudson United Bancorp of Mahwah, N.J.

Rising interest rates, a decline in bank stocks, and the unfinished integrations of institutions that have merged stifled further dealmaking But stock valuations -- the currency for acquisitions -- may be turning significantly higher.

On Thursday, bank stocks surged for the second day in a row, with the American Banker index of the 50 largest U.S. banking companies up 6.3%. The day before, it rose 4.7%, and it is up 13.5% in the past week.

Beyond stock prices, industry observers said the advance of electronic commerce and the imminent repeal of the Glass-Steagall Act will be the drivers of a coming phase of consolidation in banking. These two developments may prompt action by big financial services players that have not previously been major forces in mergers and acquisitions.

These potentially powerful forces could bring about a sea change in the geography of banking that would rival the shift in national economic equilibrium to the Sun Belt in the past two decades.

"Since we are still in the early stages of electronic commerce and electronic banking, the recent developments in banking reflect the population shifts to the high-growth areas of the country," said veteran bank economist Irwin Kellner.

"But keep in mind that in the long run, the advent of the Internet and the growing willingness of people to do banking on-line could change the banking business just as significantly," he said this week.

Echoing Charles Schwab & Co. co-chief executive David S. Pottruck, he said, "Instead of bricks and mortar, we are going to clicks and mortar" and ultimately probably less mortar altogether. "It will be almost a moot point as to where a bank's headquarters are," said Mr. Kellner, a professor at Hofstra University and chief economist at CBSMarketwatch.

Indeed, Bank One Corp. chief executive John B. McCoy said this year that e-commerce may reinforce this dynamic. His company may make no more major acquisitions, he said. Turning away from years of merger activity, he said he now views the Internet as the primary source of franchise growth.

"The Internet brings into question" a lot of assumptions about how financial services firms have operated, and its prospective impact is impossible to gauge, said Andrew Rowen, a lawyer specializing in the insurance industry for the New York law firm of Sullivan & Cromwell.

Meanwhile, the break last week in a congressional logjam on financial reform legislation, which would remove the Depression-era barriers between banking and other financial services industries, is also likely to significantly change the rules of the consolidation game.

If enacted, as seems likely, these changes "will validate the Citigroup combination (of Citicorp and Travelers Group) and once again put the big guys in the forefront of things," Mr. Kellner said.

"You won't necessarily need a Chase-Merrill-AIG combination," he said, referring to the New York banking company, the nation's best-known brokerage, and the huge insurance firm. "Any one of those three can well go to other parts of the country to make combinations if they feel it is in their best interests."

But it will be hard to erase or even much diminish the effects of a long stretch of banking consolidation that generally followed the nation's dominant economic trend of the past 20 years Sun Belt expansion at the expense of the Snow Belt.

Today, four of the nation's 10 largest banking companies by assets are headquartered in the country's warmer climes. Two decades ago there were just two such, and none outside California.

Bank of America Corp. and First Union Corp., as well as other companies from the warmer states, seized the initiative early and have expanded both within and beyond their home territories. Meanwhile, banking companies farther north largely consolidated among themselves and rarely ventured below the Mason-Dixon line or west of the Mississippi.

The New York money-center banks, which were once seen, and in some places feared, as the most likely candidates to establish national banking networks, have mostly turned their attention to global banking and expanded powers in investment banking.

And legal restrictions played a huge part in circumscribing today's banking landscape. But so did complacency, according to Mr. Kellner, who once was chief economist at Manufacturers Hanover Trust Co. and Chemical Bank and remains a consultant to Chase Manhattan Corp. since their successive mergers.

He said, "The big banks had the feeling: 'We're the big guys, we've got the reputations, everybody wants to deal with us. Who cares what NCNB does?' "

NCNB was a predecessor of NationsBank and the new Bank of America, based in Charlotte, N.C. It is now the nation's second-largest banking company in both assets and market capitalization, behind only Citigroup Inc. and ahead of Chase and J.P. Morgan & Co.

Beyond the legal barriers and the problem of mindsets, however, was the undeniable shifting of the center of the nation's economy.

The 1973-74 energy crisis and the huge jump in oil prices it prompted put the colder Northeast and Midwest at a significant disadvantage to the warmer regions and popularized the term Sun Belt for the tier of states extending from Virginia and the Carolinas westward to California.

Today, New England, the Middle Atlantic states, and the Midwest continue to lag the national average in job creation, according to Kenneth T. Mayland, chief economist at KeyCorp in Cleveland. In contrast, "the economic development of the Sun Belt has gone beyond critical mass," he said.

"Auto factories, steel mills, high-tech companies, and financial services provider powerhouses have proliferated." From first-time job seekers to career-advancers to retirees, the region "offers plenty of opportunities in a climate that allows golfing, tennis, fishing, and little or no snow-shoveling most of the year," said Mr. Mayland, himself a native of Miami.

KeyCorp was among the few northeastern banking companies to match the expansion efforts of its southern cousins. Its former chairman and chief executive, Victor J. Riley Jr., devised a "Snow Belt strategy" that capitalized on openings in restrictive banking laws. He put the company in the Pacific Northwest as well as the Midwest and New England, with an eye toward taking advantage of growth in the Pacific Rim.

The biggest exception to the rule is probably Bank One, which has been based in Chicago since its merger with First Chicago NBD Corp. but has expanded far beyond its midwestern base to establish a major presence in Arizona, Louisiana, and especially Texas. Detroit's Comerica Inc. has also made several smaller forays.

Among the giant New York banks, only Chemical, now part of Chase, made the leap to the Sun Belt -- acquiring Texas Commerce Bancshares of Houston. Bank of New York Co., which fought hard to dismantle barriers to expansion, has become a custody specialist and remained focused on its home area.

Meanwhile, superregional leaders like the new Bank of America and new Wells Fargo & Co. have not expanded into the Northeast, perhaps wary of its slower growth rate. Mr. Mayland emphasized that northern tier economies will continue to "provide prosperity for their citizens." However, he said, it is "undeniable" that "the center of mass of U.S. economic development continues to migrate southward."

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