Wachovia battle vaults banks into a new realm.

• Position: Banking

First Union and SunTrust Banks went at each other last year like a couple of Spandex-clad pro wrestlers. Their tangle over which would claim Wachovia created so much snarling and scratching that it was easy to overlook all the other action in North Carolina banking. Bank of America got a new boss. BB&T continued its march toward the Midwest. And community banks began pairing up at a faster pace as bank formation slowed.

But Wachovia provided, by far, the year's biggest banking headlines. The Winston-Salem bank flirted with Atlanta-based SunTrust, then opted to marry a longtime Tar Heel rival, Charlotte-based First Union. SunTrust responded by mounting a hostile takeover attempt that dragged through the summer. At first, SunTrust's bid was $700 million more than First Union's of $12.9 billion. But the Atlanta bank's stock sagged as the fight wore on, and its offer dropped to nearly the same value as First Union's.

Even the North Carolina legislature got in the squabble, amending state law to block SunTrust from calling a special meeting of Wachovia shareholders. First Union, of course, won the fight, and the merged bank -- called Wachovia but based in Charlotte -- is the country's fourth-largest, with $325.9 billion in assets. Wachovia's Bud Baker became chairman, while First Union's Ken Thompson is president and CEO.

But SunTrust's gambit exposed a new vulnerability of North Carolina's banks, once viewed as too strong to be bought. "That invisible fence that seemed to be around North Carolina banking for so long seems to be down," says Thad Woodard, president of the North Carolina Bankers Association. "North Carolina is seen by border-state banks and banks both in and out of the United States as prime territory."

Tony Plath, banking professor at UNC Charlotte, says Wachovia probably has about two years to prove itself or face a takeover bid from some outsider, perhaps one from another country. That's what happened to Rocky Mount-based Centura Banks, swallowed by Royal Bank of Canada in a $2.3 billion deal that closed in June. A year earlier, Memphis-based National Commerce acquired Durham's CCB Financial. When Wachovia had to sell branches as part of its merger with First Union, National Commerce bought 37, including 14 in North Carolina.

Only the state's biggest bank, Bank of America, appears safe. With $640 billion in assets, it's so big that almost any other bank would choke on it. It got that way by wolfing down other banks, but it has...