Can a middle-tier banking company find success and maintain independence in the increasingly competitive New York-New Jersey market?

Many industry observers say the answer to that question is still yes, but the prospect is becoming more difficult.

If a rumored deal between Summit Bancorp of Princeton, N.J., and FleetBoston Financial Corp. of Boston were to become a reality, analysts say the remaining midsize banks could have a tougher time surviving. The squeeze is especially tough in markets where smaller companies are competing with larger franchises that can offer a broader range of products and more locations.

"The smaller companies that don't have the offerings … [and] can't offer the best rates on deposits or lower fees on checking accounts" will face challenges, said Stephen Biggar, an analyst with Standard & Poor's Equity Group. "Some of the higher-end products like mutual funds and annuities that big banks have offer more competitive pricing and a broader array of choices."

While that may be true to a degree, smaller, more nimble banks can find success and compete in areas like Summit's market, other analysts said.

"It's hard to make a blanket statement about New York and New Jersey because they are different almost county by county," said Kevin Timmons, an analyst with First Albany Corp. about the continued independence of midsize banking companies. "I don't think its impossible [for smaller banks] to carve out an existence. The consolidation that's happened in the last 10 years has actually opened some opportunities."

FleetBoston is openly looking at almost any opportunity to gain a larger foothold in the New York metropolitan area. The company offered its financial support to North Fork when that company announced its $1.9-billion bid for Dime. North Fork later released Fleet from the agreement when Dime used the partnership to its own public relations benefit.

Certainly, the efforts of large banks such as Fleet have compelled smaller ones to evaluate the best way to expand or preserve their own places in the market.

When Dime Bancorp agreed to a merger with Hudson United Bancorp, for example, North Fork was acutely aware of the threat that the combined company could represent and did everything it could - including launching the hostile bid - to break up the deal. North Fork succeeded as a spoiler but extended its own deadline until today to consider whether to drop the hostile bid. It was awaiting a decision from the Federal Reserve Board on its application to acquire Dime.

At press time Wednesday, the Fed gave its approval to the deal.

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