MONTGOMERY, Ala. - Colonial BancGroup signed a letter of intent this week to acquire Farmers and Merchants Bank of Ariton for $10 million in cash and stock.

Colonial, a $2.9 billion-asset bank with 98 offices in Alabama and Tennessee, will fold the $51 million-asset Farmers and Merchants into its holding company, pending shareholder and regulatory approval.

The deal amount, which represents 1.36% of Farmers and Merchants' book value, will consist of $7 million in a stock exchange and $3 million in cash.

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