Urge to merge could surge among smaller N.C. banks.

• Position: BANKING

After yawning their way through the first half of 2005, the state's three biggest banks got busy buying in the second half. Even Winston-Salem-based BB & T--which had sworn off mergers in 2004 after struggling with two earlier purchases--got back in the game, pulling the trigger in December on a $623 million deal for Atlanta-based Main Street Banks, which should close in the second quarter. And BB & T isn't done. It wants to grow assets through acquisition by about $5 billion this year. Main Street's $2.5 billion gets it just halfway. "We're still looking, and we'd like to do additional deals but at a measured pace," says Burney Warren, executive vice president for mergers and acquisitions.

The two biggest Tar Heel banks, Wachovia and Bank of America, both based in Charlotte, spent much of 2005 consolidating earlier acquisitions. Wachovia, the second-largest, took all year to integrate Birmingham, Ala.-based South Trust, which it bought for $14.3 billion in 2004, but still found time for a few deals late in the year. In September, Wachovia said it would buy Irvine, Calif.-based Westcorp for $3.9 billion, giving it a large auto-loan originator that has 19 California branches. Within two weeks, it bought the international banking business of San Francisco-based UnionBanCal for $245 million and San Diego-based mortgage originator AmNet Mortgage for $83 million.

[ILLUSTRATION OMITTED]

Bank of America, the largest bank in the state, took a break after its $47 billion purchase of FleetBoston Financial in early 2004 but struck a $35 billion deal in June to buy Wilmington, Del.-based MBNA, one of the nation's largest credit-card issuers. MBNA held about $30 billion in deposits, potentially enough to tip BofA over a federal limit that bars banks from getting more than 10% of U.S. deposits by acquisition. BofA shed deposits to stay below the cap and closed the deal in early January. Domestically, BofA likely will try to add banking and financial services without adding deposits, but it's shopping overseas. In September, it bought 9% of China Construction Bank, plus a five-year option to increase its stake to 19.9%, for $3 billion.

"We will see a fairly significant number of mergers and acquisitions in North Carolina, but among our own banks," says Harry Davis, professor of finance at Appalachian State University and economist for the North Carolina Bankers Association. A large number of new banks over the past few years--a record 12 were chartered in...