First Bancshares to Buy Alabama Bank in Bankruptcy Deal

Add First Baldwin Bancshares in Foley, Ala., to the list of companies turning to bankruptcy as a way to stabilize banking units.

On Thursday the $724 million-asset First Bancshares (FBMS) in Hattiesburg, Miss., announced it would acquire First National Bank of Baldwin, the banking unit of First Baldwin. As part of the agreement, First Baldwin will file for Chapter 11 bankruptcy.

Such sales, including a few late last year, typically involve the holding company filing for bankruptcy, with the bankruptcy court overseeing the sale of the bank unit through an auction. The buyer agrees to buy the bank for a certain price and to recapitalize the bank.

At Sept. 30, the $185 million-asset First National was significantly undercapitalized, with a leverage ratio of 2.13%. Regulators are able to seize banks if the leverage ratio is less than 2%. Its nonperforming assets, however, made up 2.75% of total assets, down from 3.94% a year earlier.

For comparison, First Bancshares' bank unit had a leverage ratio of 8.38%.

First Bancshares said in a news release that the deal would add five branches along the Gulf Coast and the assets of the combined company would be $905 million.

"From day one our focus has been on growing our bank in the Gulf Coast region," said M. Ray "Hoppy" Cole, president and chief executive of First Bancshares. "We are excited about expanding our services to south Alabama and growing with this dynamic area."

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