Shares of Bank South Corp. on Thursday surrendered much of Wednesday's $2 gain as hopes dimmed that the bank was about to be acquired.

The Atlanta company's share price had surged on speculation that the company was in acquisition talks with either South Trust Corp., Birmingham, Ala., or First Union Corp., Charlotte, N.C.

Bank South, with $4.5 billion in assets, is the last independent bank of significant size in its market. J. Brent Lee, senior vice president of Bank South, declined to comment on the speculation.

Turnover Still Heavy

In afternoon trading, the stock fell 75 cents, to $12.125. Turnover was 572,200 shares, about triple the average pace but much less than the 1.14 million shares exchanged a day earlier.

It was the second time this year that takeover speculation enlivened Bank South shares.

Last May, the stock rose sharply after Dan Dorfman, a columnist for USA Today, suggested a takeover was in the wind. It fell bank when no deal materialized.

But Wall Street analysts think the bank will be a takeover target sooner rather than later.

"The likelihood is very high that it will be part of a deal, particularly if true nationwide interstate banking is really going to happen soon, as quite a few people are beginning to believe," said Kathryn H. Bissette, an analyst in Atlanta for Sterne, Agee & Leach Inc.

"I can't imagine for one moment this will be the last time we hear about" a Bank South takeover, said John J. Mason, an analyst for Interstate/Johnson Lane, Atlanta.

He said he was told by bank officials that no deal was in the works.

Ms. Bissette suggested some southeastern banking companies like SouthTrust may be looking at opportunities for expansion, while the largest super-regional banks in the area, particularly First Union, are busy digesting a series of recent deals.

Another Deal Held Likely

But Mr. Mason said he thought First Union "still has room on its place" for one more deal of the size Bank South would represent.

Both analysts suggested that major southeastern regional banks are on the prowl for further acquisitions to close gaps in their franchises and foreclose opportunities for big outside competitors.

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