A court in Georgia wants to let a small thrift institution accomplish what it failed to do in direct takeover negotiations: get acquired by NationsBank Corp.

A superior court judge in Glynn County this week ordered the $171 billion-asset superregional to honor a merger agreement with First Federal Savings Bank of Brunswick, Ga.

The agreement was reached in 1988 with Citizens and Southern Corp., which became part of NationsBank in 1991, but the merger was never consummated.

"I've talked to a lot of people about this, and no one's heard of anything quite like it," said Ben T. Slade, president and chief executive of the $230 millionasset First Federal. "It's highly unusual for a merger to be accomplished by order of the court. But this was the only forum available to us. We exhausted all other options back in 1991."

The court agreed with the thrift's charge that its 1988 merger agreement with Citizens and Southern Corp. was breached. NationsBank is the current defendant because Atlanta-based C&S later merged with Sovran Financial Corp. of Virginia. The resulting C&S/Sovran Corp. in turn was gobbled up by NCNB Corp. in 1991 to form NationsBank.

To remedy the situation, which has cost First Federal more than $1 million in litigation expenses, the court ordered NationsBank to make an offer within 60 days to acquire First Federal. The decision follows a June jury verdict that a merger agreement had been broken. At the news, the thrift's stock soared from $21 to $32.

The stock swap rate for that offer probably will be determined in another jury trial sometime early next year, both parties believe. The rate will be the one that would have been used if the original deal had gone through in 1991. The jury will have to decide exactly when in 1991, because the stock of the two institutions fluctuated greatly during that time.

First Federal asserts that the transaction should have been closed by June 1991, when an exchange of 0.85 share of NationsBank stock for each share of First Federal stock would have been appropriate.

Using that swap rate, the deal would be worth about $59 million based on Tuesday's stock prices. First Federal has 1.5 million outstanding shares, trading at $31.50 apiece. NationsBank is trading at $46.

"We're extremely pleased with the decision," said Carlton Henson, a lawyer at McAlpin & Henson, which represented First Federal. "This is the result we've been trying to get for three years."

In a statement released Tuesday, NationsBank said it is still studying the court order but believes that an exchange rate based on First Federal's current value is about the same as the rate that would have been used in 1991.

NationsBank added that it and C&S/Sovran "offered to go forward with this transaction at the contract price in September of 1991 before this litigation was ever filed." The thrift rejected the offer because of the added tax burden in a cash deal and because it didn't reflect the damages suffered from the breached merger.

As for First Federal, which has five offices in the Brunswick area, it believes the court order validates the thrift's belief that it was mistreated by the larger institutions. C&S and then C&S/Sovran strung First Federal along for three years, until the deal finally collapsed with the entry of NCNB, Mr. Slade said.

"I think they [C&S] just felt that we would always go along with them," said Mr. Slade. "But finally we had enough. We just ran out of patience. Finally the courts agreed with us, and we hit them between the eyes. There's a saying that southerners will be polite until they're mad enough to kill you."

Battle of the Banks

February 1988

Citizen and Southern Corp. enters into agreement to acquire tiny First Federal Savings Bank of Brunswick.

September 1989

C&S merges with Sovran Financial Corp. of Virginia, surprising First Federal officials.

November 1991

After three years of delays, First Federal learns C&S Sovran will merge with NCNB to form NationsBank. The thrift C&S/Sovran's merger with NationsBank.

December 1994

Judge orders NationsBank to make an offer to acquire First Federal.

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