NationsBank Retreating from Kentucky Market

NationsBank Corp.'s reputation as an aggressive acquirer, steadily gobbling up smaller banks on a westward path toward creating a national bank, has obscured some of its moves in an opposite direction.

Since 1994, the Charlotte, N.C., company has been quietly exiting certain markets. It has struck 41 deals to sell 111 branches and $2.1 billion of assets, mainly to community banks in the South.

NationsBank took its latest such step last week, agreeing to sell its three retail branches in Kentucky-all in Hopkinsville-to $1.9 billion-asset Area Bancshares of Owensboro.

The sale, for undisclosed terms, would be $310 billion-asset NationsBank's official farewell to the Blue Grass State's retail market.

An executive said NationsBank had simply not acquired enough market share to justify the expense of continuing the operations. NationsBank entered Kentucky in 1991 through its acquisition of C&S/Sovran Corp.

"We have enjoyed serving customers in this market, however, we do not have a large enough presence in Kentucky to serve our customers effectively," said Doyle Rippee, president of NationsBank of Kentucky.

Area Bancshares is the state's sixth-largest bank-and the second-largest homegrown institution-with 54 branches in 23 cities and a 3% share of deposits, according to Sheshunoff Information Services Inc.. NationsBank ranks an unaccustomedly low 40th, with 0.34% of Kentucky deposits.

"We like to be 1, 2, or 3 in a market," said Fred Hannon, a NationsBank spokesman. "We didn't have a big enough presence in Kentucky."

Analysts said the sale is in keeping with superregional banks' more urban concentrations.

"There is always going to be a community bank strategy in the more rural areas," said George Bicher, an analyst at BT Alex. Brown. "Large banks are retrenching." Branch sales by large banks like NationsBank are not unusual, analysts said. Many are mandated by regulators following mergers.

NationsBank appears to be trimming down voluntarily to focus on regions that have better demographics and suit its expansion strategy.

"They are pruning the tree," said Harold R. Schroeder, an analyst at Keefe, Bruyette & Woods. "These are little pockets of business that hadn't been getting a lot of attention internally."

Area Bancshares would acquire the charter of NationsBank of Kentucky NA, $122 million of deposits, $94 million of loans, and $165 million of assets. The bank said it intends to hire NationsBank personnel and operate the branches under its First City Bank subsidiary.

A fourth branch at Fort Campbell, a military installation, will not be sold and will continue to be operated by NationsBank.

"Why wouldn't NationsBank just buy Area Bancshares?" Mr. Schroeder said."They are looking for bigger pieces of the consolidation puzzle."

Many of NationsBank's sales since 1994 have been to community banks in small towns in Virginia, Arkansas, Texas, and Georgia, according to Sheshunoff.

NationsBank off-loaded its biggest piece of business last year, packaging 11 Oklahoma branches and $148 million of deposits for BankFirst Corp., a $1.3 billion-asset institution in Oklahoma City that has 60 branches in 28 Oklahoma towns.

The housecleaning has not been limited to branch sales. NationsBank announced last Thursday it would sell part of the institutional trust business of the former Barnett Banks Inc. to CCB Financial Corp. in Durham, N.C. NationsBank's $15 billion acquisition of Barnett, based in Jacksonville, Fla., closed in January.

The trust sale, also for undisclosed terms, would transfer $3 billion of assets for 450 custody, escrow, and employee benefit accounts of Florida- based customers.

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