Crestar Financial Corp. sold $87.8 million in common stock this week, raising cash to buy more failed thrifts.
The sale came amid reports that Richmond, Va.-based Crestar was among the bidders for troubled First American Bankshares, Washington.
Janet S. McCabe, a bank spokeswoman, declined to comment on the reports, first published Thursday in American Banker.
However, she did confirm that the bank plans to continue to buy failed thrifts.
Five Acquired in Two Years
"We intend to use most of the proceeds from the sale for additional acquisitions," she said.
In the past two years, Crestar has bought five failed thrifts from the Resolution Trust Corp. at bargain-basement prices. The cash purchases brought in $2.9 billion in deposits.
Because the acquired thrifts were in the Richmond area, Crestar was able to close all but 32 of the acquired branches. This enabled it to keep operating costs down while adding 126,000 customers.
Crestar has used the deposits to reduce its reliance on more expensive sources of funds. The bank believes it can sell additional products, such as credit cards, to the new customers.
Plenty of potential acquisitions remain in the fragmented Virginia and metropolitan Washington market.
Crestar said that there are 19 thrifts with $6.3 billion in deposits that are either under RTC conservatorship or fail to meet the minimum capital guidelines of regulators and are likely to be seized.
"The game is far from over," said Ms. McCabe.
What is probably over is Crestar's opportunity to purchase the deposits of failed thrifts at low prices.
When Crestar made many of its purchases, other sizable Virginia banks were struggling with bad loans and stayed out of the bidding process.
The average premium Crestar paid for the deposits was 0.62%. The national average is slightly above 1%, said analysts. In all, Crestar paid $18 million for the deposits.
With other Virginia banks returning to profitability and with credit quality coming under control, competition to acquire failed thrifts is bound to become tougher. That will push up the purchase prices, which is one reason Crestar wanted to raise capital.
The sale of three million shares, which was priced Wednesday evening after the stock market closed, increased the equity-to-asset ratio by about 70 basis points, to 7.8%, which is on par with that of other southern regional banks. The Tier 1 capital ratio rose from 8.8% to 9.7% - a high percentage but one that still lags the peer-group average.