ATLANTA - Continuing to build its presence here, Alabama-based SouthTrust Corp. agreed Thursday to acquire Prime Bancshares Inc., a thrift with $686 million in assets.

The transaction, a stock swap, is valued at about $36 million, or slightly less than Prime's book value.

"It's a good deal for Prime shareholders, and it will increase SouthTrust's presence in Atlanta," said Lucy Zemp, banking analyst with J.C. Bradford & Co., Nashville.

SouthTrust, which has $11.3 billion in assets, has been using small acquisitions to build a major Atlanta franchise. It now controls $1.8 billion in assets and 72 branches in the area.

The latest deal will add 14 offices. Prime is based in Decatur, an Atlanta suburb.

In a letter of intent, SouthTrust agreed to exchange 0.89 share of its stock, plus 50 cents a share in cash, for each of the 1.61 million outstanding shares of Prime.

At $22.31 a share, the price is slightly under Prime's book value of $22.61 a share. It represents a 46% premium over its common stock price, which closed at $15.25 on Wednesday.

SouthTrust's shares were off $1.50 on the news Thursday afternoon, at $24.50.

Prime earned $1.2 million in the second quarter, representing a 0.69% return on average assets. But net operating earnings, excluding securities gains, were only $284,000.

Cheaper than Recent Deals

Its lackluster performance evidently kept down the purchase price. For example, the average price of 13 recent thrift transactions was 1.1 times book value, according to Richmond-based Wheat First Securities Inc.

SouthTrust has employed an unusual, low-cost strategy, buying troubled institutions to build its Atlanta bank into the city's sixth largest.

For total expenditures of about $31 million, SouthTrust cobbled together a community bank, an insolvent thrift, and the Georgia subsidiary of Washington, D.c.-based First American Bankshares Inc.

SouthTrust is currently offering two million shares of common stock to raise about $50 million in additional capital, partly to fund acquisitions. Last month, SouthTrust signed a letter of intent to acquire CK Federal Savings Bank of Concord, N.C., for $33 million, or 1.04 times book value. CK Federal has $435 million in assets.

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