Warning of an erosion in competition, the Federal Reserve Board has rejected an application by South Trust Corp. of Birmingham, Ala., to acquire a Florida thrift.

The central bank said last week that SouthTrust would control 40% of deposits in the Marianna, Fla., market if it were allowed to buy First Federal Savings Bank.

The thrift's $100 million in assets would have been added to SouthTrust's $164 million-asset subsidiary in that city under terms of a merger agreement last September.

South Trust, with $11.3 billion in total assets, has used acquisitions to build a network of 40 banks and 340 offices in six southeastern states.

On Friday, it announced the filing of a registration statement with the Securities and Exchange Commission for the sale of two million shares of common stock.

It said proceeds would be used for general corporate purposes, possibly including acquisitions. The stock's price was down 50 cents Friday to $26.75.

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