Merge right - and left - or go the Wachovia way.

• Author: Williams, Christopher C.
• Position: Wachovia Corp.

If Wachovia Corp.'s acquisition program were a savings account, it would be closed for inactivity. The Winston-Salem-based bank hasn't done a major deal in six years. And this while cross-state rivals NationsBank Corp. and First Union Corp. have been wolfing down bank after bank.

Wachovia's conservatism has long served it well. Its $47 billion in assets make it the 20th-largest bank holding company in the nation, and it has about 490 branches in the Carolinas and Georgia. What's more, it's one of the country's strongest banks in terms of profitability and asset quality.

But plenty of investors and analysts worry that Wachovia has lost touch with the fast-changing banking business and isn't growing quickly enough to compete against big boys like NationsBank and First Union. In North Carolina, Wachovia's share of deposits, at 15%, has slipped from No. 2 to 3. While competitors are busy building nationwide franchises, Wachovia is buying back its own stock. Last year, it repurchased almost 8 million shares and in January announced plans for 10 million more.

Several analysts, including John Mason, with Interstate/Johnson Lane's Atlanta office, have rated the stock a "hold" because of its lack of deals. Wachovia, they say, eventually may find itself without the heft to compete with nationwide banks. Good acquisitions are a quick way to add market share and broaden product lines and the customer pool.

Wachovia has pulled off big deals before. In 1981, it bought First Atlanta. In 1991, it paired with South Carolina National Bank in a deal worth more than $800 million. In 1995, Wachovia came close to inking a deal with Atlanta-based SunTrust Banks Inc., which would have created the South's third-largest bank, but the merger collapsed. The talk at the time was that Wachovia backed away because SunTrust - stronger financially - would have taken control. Their management styles might have clashed, too: Wachovia is rigidly centralized, while SunTrust is just the opposite.

So why has Wachovia been shunning deals? "It feels it's so much better than other banks [that it] can't see paying a big premium for some other bank of average quality," Mason says.

That smugness may be waning. J. Walter McDowell, president and CEO of Wachovia's North Carolina bank, says, "We are looking for the right opportunity, in the right market, at the right price." Analysts say Wachovia is eyeing Virginia and mention Signet Banking Corp. and Crestar Financial Corp., both in...