After Big Merger, Centura of N.C. Says Deep Cuts Will Bring Profits

A month after completing the largest deal in the company's 11-year history, management of Centura Banks Inc. says that the integration is complete and that cost cuts will be deeper than originally expected.

Centura announced last August it would buy Triangle Bancorp of Rocky Mount, N.C., for $608 million, creating a company with $11.5 billion of assets and 255 branches in the Carolinas and southeastern Virginia. At the time, Centura promised to eliminate about $32 million, or 55%, of Triangle's costs.

In an interview last week, Centura president and chief executive officer Cecil W. Sewell Jr. said he now expects the cost savings to be closer to 60%. Nearly all of Triangle's branches overlapped with Centura offices, and the back-office operations have been completely consolidated.

"The conversion has been extremely smooth, and problems were minimal," he said. "Our priorities for this year are to get the deal done and retain the customers we have acquired. It is not just Job One, it is Job Two and Three as well."

Mr. Sewell said the post-merger cost-cutting will help Centura meet earnings estimates despite the Federal Reserve's series of interest rate hikes. Analysts are expecting the company to earn 90 to 94 cents a share this quarter, according to First Call/Thomson Financial.

Though not disputing that higher rates are worrisome, Mr. Sewell said he remains comfortable with Wall Street's first-quarter estimates.

"Interest rates make business tough, and anyone who tells you otherwise is not being totally candid," he said. "Fortunately for us, we have the Triangle deal and its cost savings to help us. It's going to be sloppy, but we believe we will be there."

With the Triangle deal complete, the bank says it has the size and the products it needs to increase earnings.

"I can't think of any services that are offered by a big bank in our market that Centura can't offer," said Michael S. Patterson, chairman of Centura and former chairman and chief executive officer of Triangle. "For the small- to midsize-business customer, we have all the products that we need."

The company is keeping an eye out for expansion opportunities. Mr. Sewell said some community banks in his home state would interest him. But because he is unwilling to pay too much, he said, he does not anticipate announcing another deal anytime soon.

"We have always said that banks are sold, and not bought," he said. "You have to wait until the seller is ready, or else you are going to overpay."

Despite a recent rebound in bank stocks that also helped lift Centura shares, the company's stock continues to struggle to reach last year's levels. The shares closed at $40.625 on Friday, down 75 cents for the session and down from its $44.125 closing price at the end of 1999.

Outside of North Carolina, he said, Centura wants to build its presence along the South Carolina coast and around Norfolk, Va.

The company is building branches in those markets, but he said it would not rule out an acquisition.

Industry experts say Centura could get a windfall from a recently announced deal - National Commerce Bancorp.'s plan to buy CCB Financial Corp. for $1.94 billion. CCB, which is based in Durham, N.C., is Centura's longtime rival, and analysts expect to see some customer defections when its headquarters moves to National Commerce's home in Memphis.

With CCB selling, "Centura is now the largest remaining independent in the area, and I believe they are in the catbird seat there," said Christopher Marinac, an analyst at Robinson-Humphrey Co. in Atlanta.

Some have suggested that by making the deal for Triangle, Centura actually helped push CCB into selling. That deal "ruined the balance of power between the two and made CCB vulnerable," said an analyst who asked not to be named. "If it had been CCB that bought Triangle, Centura would now be a part of National Commerce."

"I am glad I didn't wake up last August and read that CCB had a deal for Triangle," Mr. Sewell said. He said the CCB deal "makes me realize that the Triangle transaction was very important in the life of Centura."

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