Regional banks are readying common stock offerings to build capital ratios and create acquisition war chests.
In the past two weeks, registration statements for offerings totaling $150 million have been filed with the Securities and Exchange Commission by UJB Financial Corp., Princeton, N.J., South Trust Corp., Birmingham, Ala.; and First American Corp., Nashville.
"The industry continues to ratchet up its capital levels," said Francis X. Suozzo, banking analyst at S.G. Warburg. "The competition has been raising their capital ratios, and these regional banks have to keep pace, particularly if they want to expand."
"Investors are willing to give money to institutions that will carry out consolidations in their marketplace," said an investment banker involved with one of the planned offerings.
UJB and First American, which are recovering from real-estate-related losses in 1990, are also taking advantage of a surge in their stock prices, which have risen about 20% since the beginning of the year. Both stocks are below their 52-week highs.
"This is just an opportune time for us to continue to grow, and we want to take advantage of it," said John Haggerty, chief financial officer of UJB. Last Friday, it filed to issue four million shares, which would raise about $74 million.
Preparing for In-Market Deals
UJB wants to raise capital ratios and be ready for in-market acquisition opportunities, he said. The new stock would add about 60 basis points to UJB's total capital ratio, which was 9.41% at the end of last month, he said. The bank has assets of $13.6 billion.
First American plans to issue 1.5 million shares, which would raise about $33 million. It wants to build capital levels and improve asset quality, a company official said.
"I would not say expansion is on the docket," she added. "We don't want to just meet the regulatory standards. We want to be in a position of strength."
First American's capital ratios were marginally above Federal Deposit Insurance Corp. standards for "well-capitalized institutions," at the end of the second quarter, the official said.
Its total capital ratio was 10.78%. First American, with $6.6 billion in assets, is the second-largest bank in Tennessee.
South Trust wants to continue building southeastern operations outside Alabama, an official said. On July 10, it filed to issue two million shares, which would raise about $52 million.
The bank's stock has been flat since the start of the year, but is still trading at more than 150% of book value. The bank had assets of $11.3 billion at the end of the second quarter, 22% higher than a year earlier.
In addition, the bank has four pending acquisitions, for a total of $631 million in assets, that will largely be paid for in stock. South Trust had a 10.79% ratio of total capital to assets at the end of March. In the WingsUpcoming common stock offerings Amount Number to be of shares raised(*)UJB FinancialCorp. 4.0 $73.5 MILLION MILLIONPrinceton, N.J.SouthTrustCorp. 2.0 $51.8 MILLION MILLIONBirmingham, Ala.First AmericanCorp. 1.5 $33.0 MILLION MILLIONNashville, Tenn.* Based on Wednesday's closingstock pricesSource: SEC filings