Bank South Corp. moved to bolster its position in a fast-growing suburban Atlanta county by agreeing to acquire Gwinnett Bancshares in a stock swap valued at $62 million.
The deal price for the Lawrenceville, Ga.-based holding company for Gwinnett Federal Bank equals 1.6 times the thrift's book value. The agreement was announced late Wednesday.
Gwinnett Federal, the largest thrift left in the Atlanta area, has $329 million in assets and eight offices. The acquisition will boost Bank South's deposit market share in Gwinnett County to a first-ranked 19%, up from fourth place.
"Being No. 1 in that county gives us a nice position," said Bank South's chief financial officer, Ralph E. Hutchins Jr.
Bank South already has 16 offices and a 10% market share in the county. As a result, Mr. Hutchins said, the bank would knock a whopping 55% out of Gwinnett Federal's $8 million in annual noninterest expenses by eliminating offices and support functions.
He also predicted the deal would add 3 or 4 cents a share to Bank South's 1995 earnings per share. Analysts currently expect Bank South to earn between $1.75 to $1.85 a share next year.
"It's son of a no-brainer," Mr. Hutchins said. "Any time you can get something in metro Atlanta that overlaps with us, you've got a big advantage."
Bank South's stock fell 37 cents Wednesday to close at $19.12 a share. But Bank South still carries a 180% market-to-book valuation, one of the highest in the region. It closed Thursday's trading up 12.5 cents to $19.25.
"The reason the deal works is Bank South's currency power," said Robinson-Humphrey's John Coffey. "Bank South trades at a premium valuation to other banks in the Southeast. And as a result, they have a strategic advantage in stock-for-stock transactions."
Bank South, with $6.6 billion in assets, is regarded as the best acquisition target left in Atlanta. But most recently, Bank South has itself been the acquirer. Counting the Gwinnett Bancshares deal, Bank South has now announced five community bank acquisitions since April 1992, which will bring in $1.6 billion in new assets.
The acquisition of Gwinnett Bancshares is scheduled to close in the first quarter of next year. The deal is subject to approval by regulators and Gwinnett Bancshares stockholders.
