SouthTrust Corp. plans to issue three-and-a-half million shares next month in what would be the first issue of new stock by a major bank in over a year.

The shares, priced at $25 each by Merrill Lynch & Co. on Tuesday, will raise $87.5 million for SouthTrust, Alabama's largest bank.

Though the banking industry has been feverishly repurchasing shares this year to spend excess capital, SouthTrust has found itself an exception, with a lower-than-average capital ratio.

SouthTrust is an avid builder of de novo branches throughout the Carolinas and other parts of the South, said Michael Ancell, a bank analyst at Edward D. Jones & Co., the St. Louis-based brokerage firm.

The bank is also an acquirer of community banks, he added. Those activities have forced it to spend a lot of cash, which has partly drained its capital, he said.

SouthTrust's Tier I capital ratio was 7.51% at the end of the second quarter, compared with a 10.27% average for banks with more than $5 billion in assets, according to SNL Securities Inc.

SouthTrust's equity-to-asset ratio was 6.6% at the end of June, compared with an 8.2% average for its peers, Mr. Ancell said.

The stock issue was prompted by more than just capital ratios, said Thomas Theurkauf, who covers the bank for Keefe, Bruyette & Woods Inc.

"SouthTrust chief executive Wallace Malone marches to the beat of a different drummer," he said. "He is a very savvy banker, and he realizes the equity markets are strong.

"He can issue stock at very attractive prices, and unlike banks in the North and West, his bank is growing rapidly. And that growth has to be funded."

SouthTrust would only say the proceeds will be used for general corporate purposes, which it described as acquisitions as well as investments in banking and nonbanking subsidiaries and Treasury securities.

Since the start of the year, SouthTrust reached agreements to buy six smaller banks totaling $670.6 million in assets, according to the preliminary prospectus issued by the bank.

Originally, SouthTrust expected to issue only three million shares, which would have raised $75 million. But investor demand was high, so the underwriters exercised the "green shoe," the prospectus provision that allows the investment banks to issue 15% more shares in case of excess demand.

The lead underwriter for the deal is Merrill Lynch. The other underwriters are CS First Boston, Dean Witter Reynolds Inc., J.C. Bradford & Co., and Interstate/Johnson Lane.

The gross spread, or the amount the underwriters will receive for each share they issue, is 87.5 cents. This amount includes management and underwriting fees, as well as a selling concession paid to salespeople.

Other brokerage firms that are invited to issue the stock will receive just the selling concession, which is priced at 50 cents per share.

There is also a reallowance fee of 10 cents per share, which is the fee one underwriting syndicate member will charge another if the two firms make a trade in the new SouthTrust stock.

The delivery date, or the day when the investment banks will buy the shares from SouthTrust, is Oct. 10.

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