3 Stocks Rally Again In Wake of BB&T Deal

North Carolina's mid-size bank stocks have been on a roll since BB&T Financial Corp. and Southern National Corp. announced a merger of equals earlier this month.

The shares of Rocky Mount, N.C.-based Centura Banks Inc., Durham-based CCB Financial Corp., and Whiteville, N.C.based United Carolina Bancshares have all risen between 5% and 9% since the deal was announced.

On Wednesday, as the stock market surged more than 70 points, Centura ended up 12.5 cents at $25; CCB was unchanged at $43.25; and United Carolina was up 25 cents to close at $27.25.

The recent rise is the second for the trio. The shares began surging even before the state's national reciprocal interstate banking law took effect July 1.

While all three have publicly stated a desire to remain independent, analysts say each would be an attractive entry vehicle into the Tar Heel State.

The prospects of an unwanted out-of-state buyer brought together BB&T and Southern National, which were the largest of the state's thinning ranks of mid-tier institutions.

"The BB&T deal has got to make some management rethink their positions," said David C. Stumpf of Wheat First, Butcher & Singer in Richmond, Va. "BB&T and Southern National said they felt vulnerable to takeover and if they felt that Way, shouldn't these banks?"

The North Carolina market is dominated by what is euphmestically dubbed the Big Three: First Union Corp, NationsBank Corp. and Wachovia Corp., which collectively control nearly 60% of the state's deposits.

But as those banks have looked elsewhere for growth -- apparently content with local operations -- a coterie of healthy mid-tier banks has prospered.

However, with interstate banking arriving, and recent signs the Big Three will consider instate mergers, takeover speculation has swirled around the four remaining banks which have $3 billion to $10 billion in assets.

Still, David M. West, a banking analyst with Davenport & Co., said North Carolina's banks are still safe from takeover.

While the BB&T and Southern National merger did focus attention on the state's surviving independents, he said it makes little sense for out-of-state banks to move into such heavily dominated markets.

Names such as Banc One Corp. and BankAmerica Corp. have been bandied about, but Mr. West said none have existing branches in state to create the kind of synergies necessary to make an acquisition cost-effective.

Mr. Stumpf estimated the remaining mid-tier banks could sell for roughly two times book or higher, meaning that CCB would fetch almost $600 million, Centura more than $700 million, and United Carolina $560 million.

But with most superregionals' stock prices soft, Mr. West said, it may be some time before they can seriously consider an acquisition in North Carolina.

For their part, the three banks at the center of speculation reject the strategy employed by BB&T and Southern National, which would create an $18.8 billion asset company if approved by shareholders and regulators.

"Size in and of itself is not going to protect anybody," said Robert R. Mauldin, chairman, CEO, and president of Centura, which was formed through a merger of equals in 1990 and now has $4.1 billion in assets.

"It is always a concern," he said of uninvited takeovers, "but the bigger concern that we have is that we offer customer service and we continue to attract customers to the bank and our bank is profitable. We think that is the way to insure against takeover."

A fourth North Carolina bank that analysts say could be a takeover candidate, but whose stock has not moved as much, is First Citizens Bancshares.

Headquartered in booming Raleigh, the $6 billion-asset bank has a strong franchise with an extensive branch network. It has also been an active acquirer within North Carolina and neighboring states, Mr. West said.

The stumbling block to acquisition of First Citizens: It is closely held by the Holding family, which has resisted selling.

Known for their superregional strategies, both NationsBank and First Union have made minor but pricey in-state acquisitions recently. Mr. Stumpf said this could mean the two banks are beginning to refocus on their home territories.

But Mr. Stumpf disagreed that out-of-state banks would not make a serious effort in North Carolina after years of staying away.

"No one believed they could buy a bank in North Carolina and compete against the Big Three," he said. "But people are focusing on the market more.

"Why wouldn't a Banc One or a Bank of America not want to operate there?" he asked. "They compete against them [the Big Three] in every other market, why wouldn't they want to compete against them in North Carolina?"

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