Webster Financial Corp. of Waterbury, Conn., is answering the competition from out-of-state rivals by bulking up in its home markets.
In the last two weeks the $9 billion-asset thrift company has struck deals to buy 10 branches in southern and central Connecticut from two of its biggest rivals - Chase Manhattan Corp. and FleetBoston Financial Corp. And within the next few days, Webster is expected to close its deal for $800 million-asset New England Community Bancorp of Windsor, Conn. 
The transactions would give Webster nearly $7 billion of deposits in Connecticut, vaulting it ahead of People's Mutual Holding Co. of Bridgeport into second place among the state's financial institutions. Only FleetBoston, with about $16 billion of deposits, would be larger.
The deals also show that Webster has no plan to sit on the sidelines while competitors such as FleetBoston and Wyomissing, Pa.-based Sovereign Bancorp invade its turf, said James C. Smith, Webster's chairman and chief executive officer.
"We think there's going to be a lot of turmoil in our marketplace," Mr. Smith said in an interview this week. "We relish the opportunity to compete in it."
Not that deal-making is anything new for Webster; it has been one of New England's most acquisitive companies this decade. Not including the deals on the table, it has bought 13 banks and thrifts, an insurance company, and a large cluster of branches divested after the 1996 merger of a FleetBoston predecessor company and Shawmut National Corp.
The buying spree has enabled Webster to reduce its dependence on residential lending. Five years ago, home mortgages accounted for more than 90% of its outstanding loans, according to Mr. Smith. That proportion is 70% now and will fall to about 65% when the New England Community deal closes.
"We expect to be at 55% within three years," Mr. Smith said.
Kevin Timmons, an analyst at First Albany Corp. in Albany, N.Y., said buying the Fleet and Chase branches should make Webster more visible to commercial and small-business customers. Though the branches are in slower-growing New Haven and Litchfield counties, Mr. Timmons said, he is confident that Webster will make the most of them.
"The reality is, a properly managed bank can make money no matter where it is," he said.
Other analysts are just as bullish. In a report last week, Advest Inc. predicted Webster's 1999 earnings per share will increase 15%, to $2.45. Commenting on its increasingly bank-like balance sheet, Advest said Webster might catch the eyes of larger suitors and could fetch as much as $45 per share if sold. Its stock was trading at $26.0625 a share, down 2.1%, in midday trading Wednesday.
"Given the consolidation activity that has already occurred throughout New England and the dearth of midsize companies with valuable deposit franchises, we think Webster could be an increasingly attractive potential partner for several larger regional institutions," Advest said.
