With its stock trading near all-time highs this summer, SouthTrust Corp. is taking advantage of that buying power to begin building a branch network in high-growth markets in Virginia.
But the Birmingham, Ala., banking company isnt exactly breaking the bank; rather, it is pursuing bite-size deals in the Old Dominion state.
SouthTrusts announcement Friday that it plans to buy the tiny Bank of Tidewater in Virginia Beach fits that strategy.
The $68 million deal for Bank of Tidewater is the third the company has announced in Virginia since May as it moves to add a retail banking presence to loan sales offices in Richmond and suburban Washington.
On Aug. 3, SouthTrust bought Cenit Bancorp in Norfolk for $117 million in a deal announced May 4. Cenit brought about $637 million of assets, 19 branches, and about $504 million of deposits in the Norfolk-Virginia Beach market. SouthTrust also is trying to strike a deal with Community Bankshares Inc. of Richmond, though it has twice extended a deadline and trimmed its share offer since the two companies announced their talks June 29.
Those guys are marching through Virginia faster than Sherman marched through the South, said Christopher Marinac, an analyst at SunTrust Robinson Humphrey in Atlanta.
Tidewater is a tiny but strategic prospective addition, with $295 million of assets and 10 branches in Virginia Beach, Chesapeake, and Norfolk, Va. SouthTrust said the deal would bring the companys total assets in Virginia to $1.4 billion. Wallace D. Malone Jr., SouthTrusts chairman and chief executive, was not available to comment Friday. But in a press release, he said that Bank of Tidewater should help SouthTrust continue its expansion in the state.
This acquisition strengthens SouthTrusts presence in the Virginia Beach, Norfolk, and Chesapeake areas of the Hampton Roads market, Mr. Malone said. It is a good fit for us on the heels of our recent acquisition of Cenit Bancorp in Norfolk. We are committed to expanding and growing our banking operations in this high-growth area of the state.
Mr. Marinac said SouthTrust probably sees good retail opportunities in Virginia, where until now it has stuck to lending. He said Richmond and Norfolk-Virginia Beach are fast-growing markets, as is northern Virginia, where he thinks SouthTrust may also eventually look for acquisitions.
The demographics in those areas are strong, he said. With so much consolidation among the states top players in recent years, Mr. Marinac said, he thinks SouthTrust may find the state fertile ground.
SouthTrusts buying spree in Virginia has been helped, at least in part, Mr. Marinac said, by its strong stock price, which has nearly doubled in the past year. The shares were trading at midday Friday at about $24.50 but closed down 6 cents, or 0.25%, at $24.36. Bank of Tidewaters shares soared $6.40, or 31%, to $26.90.
A part of the opportunity for SouthTrust is that their currency is high, he said. They paid a lot more than I and a lot of investors might like for Cenit, but with the high stock price, the economics work for SouthTrust.
The newly merged Wachovia Corp. has the leading deposit share in Virginia, followed by SunTrust Banks Inc., Navy Federal Credit Union, and Bank of America Corp. But all these institutions have had difficulty integrating acquisitions in recent years, Mr. Marinac said. He said he thinks BB&T Corp. of Winston-Salem, N.C., could give SouthTrust the stiffest competition as it builds a Virginia network.
Elizabeth A. Duke, the president and chief executive at Bank of Tidewater, said joining SouthTrust would let her company offer more services. SouthTrust brings our customers a great menu of products and services and a reputation for great customer service and bank management, Ms. Duke said in a press release.
SouthTrust and Bank of Tidewater said they hope to close their deal in the fourth quarter after getting shareholder and regulatory approvals. The agreement calls for SouthTrust to exchange 1.0691 share of its stock, or a combination of cash and stock worth $28, for each Bank of Tidewater share.