An ambitious St. Louis community bank is buying a thrift to raise its profile in a rapidly consolidating market.
Allegiant Bancorp, which has $377.6 million of assets, announced last Monday it was acquiring Reliance Financial Inc. for $10.2 million in stock, or 1.3 times the thrift's book value.
The purchase, expected to close in the third quarter, fits into the banking company's long-term plan to remain independent and competitive in the St. Louis marketplace.
"We see ourselves as one of the local niche survivor banks," said Shaun R. Hayes, chief executive officer of Allegiant. "We're getting to the size where we can compete against the NationsBanks of the world and the other national competitors we see entering the market."
In buying Reliance, Allegiant would acquire $31 million of assets as well as a presence in the southwestern part of the city, where it currently has none.
Moreover, Reliance is replete with capital-about $20 million, Mr. Hayes said-which the bank could use to expand further with branch purchases. The recent acquisition of local giant Boatmen's Bancshares by Charlotte, N.C.- based NationsBank Corp. and Mercantile Bancorp.'s crosstown purchases of Roosevelt Financial Group and Mark Twain Bancshares are expected to lead to branch sales.
Allegiant now has nine offices and hopes to have 12 by yearend, Mr. Hayes said.
Andrew N. Baur, CEO of Mississippi Valley Bancshares, the largest community bank in St. Louis with $1.1 billion of assets, said Allegiant's move may portend more merger activity as the city's community banks vie for position in a market dominated by fewer big players. "I would guess there would be continued consolidation," he said.
This would be the first acquisition by Allegiant since 1991. Nevertheless, the banking company has grown 262.5% since 1993, according to Mr. Hayes.
Allegiant has expanded during the past five years by opening branches and then offering specials on deposits and mortgages, as well as mining the city's small-business community, Mr. Hayes said.
However, because of the high rates it offers on deposits and the preponderance of home loans in its portfolio, the banking company's earnings have lagged those of its peers. Allegiant earned $1.4 million in the first nine months of 1996, racking up returns on assets and equity of 0.64% and 12.83%, respectively.
Allegiant's earnings will lag for the foreseeable future, but shareholders recognize that as the cost of the bank's strategy, Mr. Hayes said. "We are building for the future," he said.
