Wrapping up its second financial services deal in as many weeks, United Parcel Service Inc. agreed to buy First International Bancorp Inc. in a transaction valued at $78 million.

Though the deal represents a tiny fraction of Atlanta-based UPS' $67 billion market capitalization, it is seen as a warning shot not only to other shipping companies such as FedEx Corp. and Airborne Express, but to the banking industry.

"This is a worldwide game," said Rick Black, an analyst with Blaylock & Partners. "There's a race to put it in (financial services], but UPS is taking a prudent approach in buying smaller companies."

UPS is hoping to offer FIB's financing expertise--backed by UPS's AAA-rated balance sheet--to mid-sized companies. As one analyst explained, the company will "help you build an overseas business and help you pay for it."

UPS was advised by Goldman Sachs Group Inc. and represented by King & Spalding, Day Berry & Howard llp and Alston & Bird llp. First International was advised by J.P. Morgan Chase & Co. and Keefe Bruyette & Woods. FIB was represented by Bingham Dana llp.

The deal is expected to close before July 31, after which a collar kicks in on the exchange ratio.

UPS' is paying a 30% premium for Hartford, Conn., FIB based on the bank's recent stock price. The deal follows UPS' announcement Jan. 10 that it would buy freight coordinator and broker Fritz Cos. for $450 million in stock. But it also ups the ante in that FIB is a well-known banking institution.

"It's not unlike GM and GMAC," said Mark Davis, an analyst with the Banc Stock Group in Columbus, Ohio. "They realize there's more money to be made in financing than selling the products and services they provide."

As part of the deal, however, FIB will sell its $260 million in deposits and relinquish its Federal Deposit Insurance Corp. charter. However, it will remain a "non-depository" bank in the eyes of Connecticut bank regulators.

In lieu of deposits--more than half kept in expensive-to-service certificates of deposit--FIB will use the balance sheet of UPS Capital, the finance subsidiary of UPS, to back its loans. And unlike other breakthrough deals, such as Wal-Mart Stores Inc.'s buyout of Federal BankCentre in Broken Arrow, Okla., in 1999, the deal is limited to the export-import expertise of FIB.