Banc One Agrees to Buy Kentucky's First Security
Banc One Corp. on Wednesday agreed to buy First Security Corp., quintupling its assets in Kentucky to $2 billion.
The stock swap is valued at $204 million, or 1.85 times First Security's book value. First Security shares added 75 cents Friday to their $3.75 rise Wednesday, reaching $20 near Friday's close. Banc One shares gained 62.5 cents Friday, to $44.25, for a two-day rise of $1.
Lexington-based First Security lost $8.3 million during the first nine months of 1991 and finished the period with an 8.7% ratio of nonperforming assets to total loans.
In Talks with the OCC
Though still well capitalized, First Security has come under increased regulatory scrutiny and is negotiating an administrative agreement with the Office of the Comptroller of the Currency.
"The company has been undermanaged," said Kenneth Puglisi, a bank analyst with Keefe, Bruyette & Woods Inc.
Banc One's willingness to pay a premium is evidence of its ardent desire to expand in Kentucky, analysts said. First Security has $1.6 billion in assets and 28 branches, and is the state's second-largest bank company.
Columbus, Ohio-based Banc One expects to wring about $7.5 million in annual cost savings from the deal as it melds First Security with the 10-branch bank it controls in Lexington.
John B. McCoy, chairman and chief executive of Banc One, said in a prepared statement that First Security has the sort of retail and middle-market operations that fit the company's expansion objectives.
After the deal is completed in the summer of 1992, Banc One expects to command more than 50% of the bank deposits in Lexington. A Banc One officer said the company is still interested in expanding into regions of Kentucky outside Lexington.
First Security has 950 employees; it was not immediately clear what job cuts were likely.
Adding to Loss Reserves
Banc One said it expected that First Security would further build loss reserves before the merger, but said interim loss provisions would not be of a severe or surprising magnitude.
The company estimated that First Security would have to post annual income of about $16 million in order to avoid a dilutive effect on Banc One.
Table : First Security At a GlanceHeadquarters Lexington,KyAssets $1.6 billionBranches 28Employees 950
Nine-month net loss ($8.3 million)NPA ration(*) 8.7%
(*) Nonperforming assets as percentage of gross loans.