Within hours of announcing Wachovia Corp.'s plan to buy Charlottesville, Va.-based Jefferson Bankshares, chief executive officer L.M. "Bud" Baker was already hinting of more to come.
His immediate focus: the northern Virginia markets near Washington.
Though Jefferson would give Wachovia about $2.1 billion of assets, 130,000 customer households, and 96 offices from southeast Virginia to the northwest part of the state, it would not give the Winston-Salem, N.C., banking company any presence in the affluent areas outside the nation's capital.
Mr. Baker said in an interview last week that bringing Wachovia to Washington, which he calls a "high natural growth area," is leading his list for expansion in Virginia.
Though he would not specify a strategy for entering that market, he said Wachovia would move quickly if it could find the right deal.
"If there was an opportunity available, we'd be up on the balls of our feet, and we might surprise you with how fast we'd move," said Mr. Baker.
The $47.5 billion-asset banking company has spent the last few years concentrating on expanding its franchise in the Carolinas and Georgia. The move into Virginia was the company's first major acquisition since 1991, and many industry observers were taking it as a sign Wachovia would become an active player in the merger game during the next few years-at least in Virginia.
"They will definitely be looking in the state of Virginia to expand," said Vernon C. Plack, an analyst at Scott & Stringfellow Inc., Richmond, Va. "Jefferson doesn't do a whole lot for Wachovia. They will be looking to add."
While Wachovia has watched from the sidelines, both NationsBank Corp. and First Union Corp., Wachovia's North Carolina competitors, have built large presences in Virginia and in the Washington, D.C., area. NationsBank has about 16% of the Washington-area market, and First Union, 10.8%. Richmond, Va.-based Crestar Financial Corp. also has a large presence there, with a 16.5% market share.
By contrast, Jefferson has no presence in the District of Columbia area, and only a 2.5% market share statewide.
"You need more presence than that," said Anthony Davis, an analyst at Dillon Read. The Jefferson acquisition, which was announced June 10, "was a good practice move," he added.
Analysts were hesitant to speculate how Wachovia might make its move into the northern Virginia market.
But Mr. Davis said First Virginia Banks Inc., a Falls Church company with about $8 billion of assets, would fit well with Wachovia's conservative, customer-oriented culture. First Virginia has about 5% of the Washington-area market.
"First Virginia would be an ideal fit for Wachovia," he said. "They have a very competitive profile in northern Virginia."
First Virginia is primarily an installment, consumer loan-oriented bank, he said, so there would be great cross-selling opportunities for Wachovia's corporate products.
R. Harold Schroeder, an analyst at Keefe, Bruyette & Woods Inc., said it would be difficult for Wachovia to acquire anything near the District of Columbia but that expansion in that area would be a solid strategic move. "It's a wealthy area of the country," he said.
Outside the Washington area, expansion opportunities in Virginia might include buying some of the branches Richmond-based Signet Banking Corp. recently put on the market, said Mr. Baker, Wachovia's CEO.
Signet said this month that it wants to sell 39 branches as part of a restructuring. Some of those branches are in the northern neck of Virginia and along its eastern shore; none would give Wachovia a foothold in the Washington area.
With the Jefferson deal, Wachovia is venturing for the first time outside its longtime markets in the Carolinas and Georgia. Virginia is attractive to Wachovia because it is one of the largest and fastest-growing states in the Southeast, outside of Florida, a state which bank officials have said Wachovia would also like to enter.
Moreover, Wachovia has long had relationships with a number of corporate customers in Virginia. Last year, it opened a private banking office near Norfolk that has performed well.
To top it all off, Mr. Baker's father is a Virginia resident, and Mr. Baker has often lamented his inability to make his father a Wachovia customer.
That much, at least, would be resolved with the acquisition of Jefferson, which offers three banking locations not far from where Mr. Baker's father lives.
"He has been absolutely starved for banking quality," Mr. Baker said.