For most of its 10 years, First Sterling Banks Inc. in Kennesaw, Ga., has toiled in relative obscurity in the Atlanta suburbs.
But that changed last week when the $343 million-asset company announced a merger of equals with Main Street Banks Inc. of Covington, Ga., which has $503 million of assets.
The deal, valued at $91.2 million, would create a $900 million-asset company with 25 branches in seven counties. More importantly, said First Sterling president and chief executive officer Edward C. Milligan, it will let First Sterling make even more acquisitions and position it as a dominant community bank in the Atlanta area.
"You can expect us to enter some conversation with potential sellers," said Mr. Milligan. "We want our franchise to cover Atlanta." The new company, which would operate under the First Sterling name, aims to fill the void being left by Premier Bancshares of Atlanta.
Premier - a prolific buyer of small banks around Atlanta in recent years - agreed in July to be bought by BB&T Corp. of Winston-Salem, N.C., for $639 million. Premier had bought nine banks within a 50-mile radius of Atlanta since 1997.
Mr. Milligan said First Sterling would probably begin its acquisition hunt soon after its deal with Main Street closes, in the second quarter.
Jefferson Harralson, a bank analyst at Robinson-Humphrey Co. in Atlanta, said the deal would certainly elevate the company's profile - both on Wall Street and throughout Georgia. And he agreed that Sterling is in prime position to pick up where Premier left off.
"They've just moved into Premier's spot," said Mr. Harralson. "In this case, one plus one equals more than two."
Wall Street applauded the deal as well. First Sterling's shares rose 27%, to $13, in heavy trading Thursday, the day the deal was announced, and were trading at $13.875, up 6.73%, at midday Friday.
Still, First Sterling is not alone in its quest to fill Premier's shoes. It can expect stiff competition in bidding on banks with less than $500 million of assets from $1.2 billion-asset Century South Banks of Dahlonega, Ga., and $613 million-asset Flag Financial Corp of LaGrange, Ga.
James A. Faulkner, CEO of Century South, said mimicking Premier's strategy is "certainly something we'd all like to do."
Mr. Milligan's said his confidence comes from the strength of the two merging companies. If third-quarter results were combined, he said, return on assets would have been 1.5% and return on equity 17.6%.
Mergers of equals can be tricky to pull off because of social issues between the partners' boards and top executives. These sticking points usually revolve around who would run the company, the number of directors, and where the post-merger organization would have its headquarters, observers said.
"Someone has to be the No. 2 man, and that's why you don't usually see mergers of equals," said John Burke, principal at Brown, Burke Capital Partners, an Atlanta investment banking boutique.
But in this deal, that will not be a problem, Mr. Milligan said. Robert F. Fowler 3d, chairman and CEO of Main Street, is to become chairman of First Sterling, and Mr. Milligan is to remain CEO.
"Putting aside our egos was the easiest part," Mr. Milligan said.
