Six years after their merger of equals was called off, BancTrust Financial Group Inc. in Mobile, Ala., has agreed to buy the $905 million-asset Peoples BancTrust Co. Inc. of Selma, Ala., for $153 million in cash and stock.
The deal, which was announced late Monday, would create the fifth-largest bank holding company based in Alabama and roughly double BancTrust's asset size, branch network, and deposit share in its home state.
Most important, it would give BancTrust a steady stream of low-cost deposits that it could use to fund loan growth in faster-growing areas of Alabama, as well as in the Florida Panhandle, where BancTrust has 10 branches.
W. Bibb Lamar Jr., the president and chief executive officer of the $1.4 billion-asset BancTrust, said in an interview Tuesday that the previous deal was terminated because "we were trying to do a merger of equals; a merger of equals is a very difficult task.
"Now the situation is much different," he said. "They will be merging into us and bear our name, and the economics of the deal make a lot of sense on both sides."
Some analysts questioned whether the deal is good for BancTrust shareholders.
"The concern is that the markets that Peoples serves aren't growing very fast," said James Schutz, an analyst at Sterne, Agee & Leach Inc. in Birmingham, Ala.
But Mr. Lamar said that Peoples' slow-growth markets "are full of core deposits and I think that is something that really complements our franchise."
BancTrust could use the funding.
After exhausting its core deposits, BancTrust's Florida bank was forced to pay up for deposits in order to fund loans in the Panhandle — putting added pressure on its net interest margin, which was already suffering from the statewide real estate slowdown, deteriorating credit quality, and flattening yield curve.
An infusion of deposits would "give us an opportunity to do a lot more lending [in Florida] once the market turns," Mr. Lamar said.
BancTrust's Florida bank had been the company's engine of profitability in recent years but it has struggled of late and now BancTrust is looking more to its home state — particularly Mobile and Baldwin counties — for earnings growth.
Mr. Lamar said that the deal would give BancTrust the size and geographical diversity to maintain profitability even if particular markets slump.
"I think the additional size certainly helps mitigate … the nonperforming loans that have appeared down in Florida," he said.
BancTrust is to pay $25.50 for each Peoples share, or 1.8 times the Selma bank's tangible book value and a 9% premium to its deposits.
Mark Muth, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp, said the deal is "not a merger that's very expensively priced," considering what BancTrust is getting.
Peoples has 23 branches in 11 Alabama counties and just over 1% of the state's overall deposits, according to Federal Deposit Insurance Corp. data. When the deal closes BancTrust would have 44 branches in the state and about a 2.1% deposit share.
Peoples "has a good core deposit base, but they've had a harder time growing loans," Mr. Muth said.
Peoples is the parent of Peoples Bank and Trust Co. Its branches are to become branches of BancTrust's bank subsidiary.
The companies have overlapping branches in Prattville and Montgomery, but it was unclear whether any would be closed. In a press release announcing the deal, Mr. Lamar said that his company sees "clear opportunities" for cost savings, but in a follow-up interview he declined to give details.
Peoples' shares rose nearly 8% on news of the deal, to close Tuesday at $24.57. BancTrust's stock price climbed more than 4%, to close at $19.73.
The deal is expected to close before yearend.
