Two Alabama companies are in talks to form the seventh-largest bank holding company based in the state.

Peoples BancTrust Co., with $649 million of assets, and $563 million-asset South Alabama Bancorp. announced Wednesday that they are negotiating to reach a definitive agreement on a merger of equals.

Richard P. Morthland, the chairman and chief executive officer of Selma-based Peoples, said that the companies have been talking about merging for a year and were encouraged by the size advantage that would give the new company a strong market share in southern and central Alabama.

"A billion dollars is a magic number, and this puts us in a different realm that will benefit the stockholders and the community," Mr. Morthland said.

The proposed company would retain the name of Peoples BancTrust, but shareholders of Mobile-based South Alabama would own 56%, and Peoples' shareholders would own 44%. All subsidiaries would eventually take on the name, Peoples Bank and Trust Co.

Southern Alabama's president and chief executive officer, W. Bibb Lamar Jr., would become co-CEO and president, and Mr. Morthland would become the co-CEO and chairman. After two years Mr. Lamar would be the sole CEO. The board of directors would come half from each company.

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