SouthTrust Corp. raised $73 million through a recent stock offering, building cash to continue its heated pace of acquisitions.
The Birmingham, Ala., bank will use about $14.5 million of the proceeds to pay the cash portions of two pending acquisitions - C-K Federal Savings Bank in Concord, N.C., and Prime Bancshares in Decatur, Ga. - analysts said.
SouthTrust can use the balance to purchase about $1 billion more in assets from thrifts and regulators, analysts estimated.
"The stock deal will let SouthTrust continue implementing its strategy of making strategic in markets acquisitions in markets that are growing well and where it already has" a presence, said Kathryn Bissette, an analyst with Sterne, Agee & Leach in Atlanta.
3 Million Shares Sold
Her firm, along with J.C. Bradford & Co., co-managed the stock offering. Merrill Lynch & Co. was lead manager. In the offering, SouthTrust sold 3.05 million shares at $24 each.
SouthTrust has successfully raced along the acquisition trail for the past 20 years. The bank, with $11.3 billion in assets, enjoyed double-digit growth in earnings during the 1980s from the numerous acquisitions it made in Alabama.
A few years ago SouthTrust began expanding into other southern states - including Florida, Georgia, and North and South Carolina - seeking markets that would stimulate strong earnings growth.
Adept at Consolidations
As far as Wall Street is concerned, SouthTrust's management has proven it can consolidate and operate acquisitions. And those managers show no signs of slowing: In the last two years, SouthTrust has completed seven deals and has seven more pending.
The stock offering raised the equity-to-asset ratio to 6.8%, from an already high 6.2% at quarter's end.
"SouthTrust has had one of the best long-term records in the business in terms of earnings growth and return on assets and equity," said Francis X. Suozzo, an analyst with S.G. Warburg & Co.
Each year for the past five years, assets have grown by 14% and equity by 13%. At 8.6%, earnings-per-share growth was slower, reflecting commercial real estate loan troubles in recent years.
In 1991, SouthTrust reported a return on assets of 0.95% and a return on equity of 15.35%. In the second quarter, those numbers were 1.02% and 15.80%, respectively.
As SouthTrust continues to expand in markets where it has established beachheads, the most likely spots for the banking company's next round of buying would be in Atlanta and in North and South Carolina.
It has two pending acquisitions in North Carolina and one in South Carolina. At first blush, those two states may seem like tough markets because of strong competitors such as Nations-Bank Corp. and First Union Corp. But analysts say SouthTrust has shown some success in attracting consumers and small businesses in the states.
In Atlanta, the bank will have close to $3 billion in assets after it completes the acquisition of Prime Bancshares.
Typical of SouthTrust's acquisition pattern, it started from scratch in Atlanta by buying branches from another bank. Then it bought the deposits of a failed thrift from the Resolution Trust Corp., and in May it bought First American Bank of Georgia.
"SouthTrust has gotten up to a critical mass in Atlanta," said Ms. Bissette. "The Atlanta bank should move from break-even to slightly profitable this year."Southern AmbitionSouthTrust's pending acquisitions Assets in millionsPrime BancsharesDecatur, Ga. $686.2C-K Federal Savings 431.0Concord, N.C.Carolina Financial 144.0Charleston, S.C.Gulf and SouthernFinancial 105.3Fort Myers, Fla.Bank South3 branches 75.0Columbus, Ga.Colony Bank 23.1Clearwater, Fla.Citizens Savings Bank2 branches 20.0Raleigh and Cary, N.C.