The long run.

• Position: First Union Corp. - Special Report: Banking - Company Profile

After stumbling out of the blocks, First Union sets a winning pace in the race that matters most.

Things couldn't get much better for Ed Crutchfield Jr. and First Union Corp. Profits are expected to top $450 million in 1992, up 40% from '90. With the bank's correct bet on interest rates, the bond portfolio has an unrealized gain exceeding $500 million. The major acquisitions -- Southeast Banking Corp. of Miami, DF Southeastern Inc. of Georgia and South Carolina Federal -- appear to be going smoothly. And its stock was trading in late August at a record level of nearly $40.

That's quite a contrast with the last time BUSINESS NORTH CAROLINA visited the Albemarle native, who became president of Charlotte-based First Union National Bank in 1973 and CEO of the holding company in 1984. In October 1990, Crutchfield was under fire: Earnings had declined 10% in 1989, and the stock price had stagnated in the midteens. To blame, some analysts said, was his aggressive acquisition strategy.

Crutchfield talked to Managing Editor David Mildenberg about what has transpired in the two years since then.

Did the criticism stiffen your resolve?

No. Our plan had been laid years ago, and we knew there would be some criticism of it, and we were prepared to accept it. It's only the mile-out-of-bounds criticism that I ever bothered to respond to or object to.

Do you credit First Union's rebound in the past two years to your strategy?

That is exactly what I credit it to. And the cyclicality of the timing. You have two factors at work. One is long-term strategy, which you make and implement regardless of cycles in the economy. The other is cyclical. We've been through a tough recession, and now we're coming out of it. There is some of both. But it is more the strategy, because there are banks that are failing in record numbers right here in 1991-92 in the midst of recovery. So it's not a rising tide lifting all ships or you wouldn't have this high failure rate.

Let me back up and say what the strategy was. In 1984, I became CEO of the corporation. Interstate banking became sanctioned by the courts in 1985. We were a $7 billion, one-state bank. We had three options, one of which was to sell the company, one of which was to buy other companies and one of which was to do nothing. We investigated selling the company, and there were no buyers.

Doing nothing on the hope that somebody down range would buy us out at a big price seemed like a lousy strategy to me.

So we took Option 3, which was to go ahead and take a long view of the world and do some acquisitions and accept some earnings dilution upfront to do those acquisitions, so that by 1990 -- which was five years later from the beginning point in 1985 -- the company would be a...