BB&T Corp. said Wednesday that it would buy First Liberty Financial Corp. of Macon, Ga., for $500 million in stock.

The deal underscores the North Carolina banking company's growth ambitions in Georgia. In January, BB&T announced a $126 million deal for First Citizens Corp. of Newnan.

Acquiring $1.7 billion-asset First Liberty would take BB&T into the central and southeastern parts of the state, while First Citizens would give it a foothold in Atlanta. The deals are expected to close in the fourth and third quarters, respectively.

"First Liberty is a quality institution that will allow us to expand our presence into economically strong markets in Georgia," said John Allison, the chairman and chief executive officer of Winston-Salem-based BB&T.

First Liberty would bring BB&T 39 bank branches and 13 consumer finance offices in and around Savannah and Macon, areas that come right after Atlanta in terms of growth prospects.

"Both those areas have good underlying economic fundamentals," said David M. West, an analyst with Davenport & Co., Richmond, Va. "This acquisition will give them a good, strong entity with which to develop a regional community banking approach in Georgia."

Taken together, Liberty Financial and First Citizens would give BB&T nearly $2.1 billion of assets.

"Our goal is to grow our Georgia assets to $5 billion or $6 billion in a reasonable period of time," said Burney Warren, BB&T's executive vice president of acquisitions. "This deal gives us a strong basis to do that."

While analysts agreed that First Liberty is a good addition to First Citizens, some said that BB&T was paying a steep price for the company, which is a thrift.

The purchase price is 24 times First Liberty's estimated 1999 earnings, said William R. Katz, an analyst with Merrill Lynch & Co. Recent comparable deals were priced closer to 20 times earnings, he said.

BB&T is justifying the deal by pointing to overly optimistic earnings projections, Mr. Katz contended. "They are expecting to grow earnings 10% per annum after 2001 from this deal. I think that is an aggressive assumption for a subpar franchise."

The fact that First Liberty is a thrift company could also pose some integration challenges.

"While the thrift industry in general has started to look more like commercial banking, the culture is generally not as sales-oriented," said Mr. West of Davenport & Co.

But BB&T's Mr. Warren responded that First Liberty is "a thrift in charter only.

"Their senior credit officer is a longtime banker, and their asset-base and overall makeup is bank-like, not thrift-like," Mr. Warren said. BB&T has successfully absorbed several thrift companies, he added.

"We have experience integrating both banks and thrifts. This will be our 41st financial institution acquisition in about 10 years," he said. Buying companies is a line of business for BB&T, he added.

The transaction, which is expected to close in the fourth quarter, would be accounted for as a pooling of interests. First Liberty shareholders will get $33.25 per share if BB&T's average stock price for the 10 days before the deal closes falls between $38.22 and $39.12. The exchange ratio would be slightly higher if BB&T's stock price drops below that range, and lower if the price rises above $39.12.

BB&T shares lost 25 cents Wednesday to close at $39. First Liberty was unchanged at $73.

Separately, BB&T said it had renegotiated its acquisition of Matewan BancShares of Williamson, W. Va. The deal, announced Feb. 25, was reduced in price to $124 million, from $157.9 million, after BB&T completed a due diligence review of Matewan.

BB&T on Wednesday declined to detail what it found during its examination of Matewan's books that justified the lower price.

"All that we can say is that we did the due diligence, and upon completion of that, we mutually agreed to renegotiate," Mr. Warren said.

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