First-rate gains for third-tier banks.

• Author: Woodard, Bert
• Position: North Carolina

Stock in First Charter Corp. in Concord has been racing for the past 18 months. And why not, given the bank's proximity to Charlotte Motor Speedway?

First Charter's big gains, up 80% in 1993 and 33% this year through mid-August, illustrate how the state's "third-tier" bank stocks have outperformed their bigger peers lately. Because of continuing consolidation, North Carolina is increasingly dominated by the "first tier" of NationsBank, First Union and Wachovia and the "second tier" of BB&T and Southern National (which plan to merge), First Citizens, CCB, UCB and Centura.

Stock price Change from Change from 8/16/94 12/31/93 12/31/92 BIG THREE NationsBank $55.75 13.8% 8.5% First Union 45.50 10.3 4.3 Wachovia 33.75 0.7 (1.1) SECOND TIER (a selection) BB&T 30.50 (8.3) (4.3) First Citizens 41.00 (11.8) (19.2) Southern National 21.13 7.0 7.6 UCB 25.50 18.6 29.1 THIRD TIER (a selection) Bank of Granite 29.00 17.9 26.1 First Bancorp 20.50 (2.4) 34.4 First Charter 20.00 33.3 140.0 LSB Bancshares 19.00 18.8 26.7 Peoples Bank 23.50 20.5 53.6 Security Capital 14.75 11.3 31.1 But the best bank stocks to own during the past 18 months have been those of banks with assets of $150 million to $1 billion, particularly First Charter (FCTR-NASDAQ), with $299 million as of June 30. For example, stock in Wachovia Corp., with assets of $37 billion, dipped 1.8% in 1993 and was up a mere 0.7% through mid-August, and $6 billion First Citizens' stock fell 8.4% and 11.8% during those same periods. Peoples Bank of Newton (PEBK-NASDAQ), with assets of $180 million, was up 27% in 1993 and 21% this year.

What's behind the disparity? It's called takeover speculation, banking analysts say, citing the conventional wisdom that North Carolina's big banks will fill in gaps in their markets by buying the smaller fry. There's also a slim chance that banks from outside North Carolina will follow the example of Alabama-based SouthTrust Bank and acquire a foothold here. Through its acquisitions of thrifts and by opening new branches, South Trust is building a base in the Charlotte and Raleigh metropolitan markets.

"There probably is some takeover speculation, and with interstate branching becoming a reality, it's just a matter of time before the pace of consolidation picks up again," says analyst John "Buddy" Howard of Equity Research Services in Raleigh.

The takeover talk has panned out several times already this year. Centura bough First Charlotte Bank, UCB acquired Bank of Iredell...