Savings Bank of Fort Myers came at a reasonable price, giving the Charlotte, N.C.-based bank an attractive way to expand its market share in Florida, analysts said. The amount equals 101% of the $1.5 billion-asset thrift's book value. First Federal, now owned by Keycorp, was purchased by the Cleveland-based bank's predecessor in 1992 for $141 million in cash, or 105% of book. The thrift has $1 billion in loans and $1.1 billion of deposits, and is heavily concentrated in Fort Myers' Lee County, with half of its 24 branches located there. If the transaction closes as expected in the second quarter, First Union's market share in Fort Myers will soar from fifth place, or 9.1% of deposits, to first, with 28% of deposits. "We feel very certain we got a good deal," said Kenneth Thompson, president of First Union National Bank of Florida. Keycorp felt it had little choice but to sell, according to Frederick A. Deal, president and CEO of the bank's Florida region. When the thrift was first purchased by Society Corp. the idea was to use it as a platform for further acquisitions. But those plans came to naught as more aggressive bidders, including First Union, snapped up the major franchises that became available. "Without the opportunity to acquire and with only a limited appetite for new branches, we decided our critical mass here in southwest Florida would be insufficient for us to try to continue to maintain a stake," Mr. Deal said. Analyst William W. McGinnis Jr. of Robert W. Baird & Co. said the sale "makes a lot of sense" for Keycorp, which would realize a modest after-tax gain. "It allows them to focus on the markets where they can be stronger. Keycorp for a long time has made a point of controlling significant market share wherever it competes, and it's a very small player in Florida." Despite a recent focus on indirect consumer lending, Society First Federal retains a largely thrift-like balance sheet heavily laden with residential mortgages. Its return on assets at June 30 was a mediocre 0.64%, according to Sheshunoff Information Services Inc. To make the deal profitable by next year and certainly in 1997, First Union reportedly plans to extract massive cost savings. First Union declined to publicly describe the cuts, but analysts have been told to expect the thrift's annual expense base to be cut by half, with virtually all of its 24 branches shuttered or sold and 350 jobs eliminated. "This is really the template First Union has used in the Southeast over the last couple of years - the in-market acquisition with deep cost savings," said Thomas F. Theurkauf Jr. of Keefe, Bruyette & Woods Inc. Dean Witter's Anthony R. Davis pointed out that "Florida is an overbanked market in terms of branch locations. There's absolutely no way to justify keeping those expenses." First Union also plans to increase revenues by broadening the product range offered to Society First Federal customers. "We'll do a lot more direct consumer lending," Mr. Thompson said. Keycorp will retain a presence in Florida through its trust subsidiary, KeyTrust Company of Florida, which is headquartered in Naples and has branches in Fort Myers, North Palm Beach, and Tampa. Selling off the thrift branches will enable KeyTrust to focus on its core business lines, trust and private banking. Another affiliate, KeyBank USA, will remain active in Florida in marine lending, indirect auto, credit cards, and student loans. Brett Chase in Chicago contributed to this report.
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