Will Christmas come early at Worthen Banking Corp.?

Market watchers think Arkansas' largest bank could be sold soon, and they expect a generous price. Worthen is known to be pursuing a possible merger and rumored to be pressing for at least two times book value, or about $35 a share.

Analysts say the price at $585 million could be afforded by NationsBank Corp. or Boatmen's Bancshares, both on a rumored short list of would-be acquirers. Spokesmen at both banks declined comment.

At 52-Week High

Reports earlier this week that NationsBank might be interested in the deal sent Worthen's stock soaring to a 52-week high of $31.25, nearly 190% of book value.

Even though the $3.5 billion-asset bank in Little Rock has little overlap with either company, observers say that a premium of twice book value could be offset by potential savings from reducing the bank's expense ratio, currently in the mid-60% range.

"It's a reasonable price to pay for a bank that's squeaky clean in credit quality and is heavily concentrated in the right markets in Arkansas," said Jim Schutz, analyst with Chicago Corp.

Sets Target at $36

Mr. Schulz has set a target price of $36 a share, or about 210% of book, and says that such a price could be easily absorbed by Charlotte-based NationsBank, the country's third-largest banking company.

"NationsBank makes a logical buyer," he said, noting that Arkansas is a natural extension of the company's Texas operations.

Others say St. Louis-based Boatmen's makes even more sense, but question whether Boatmen's management is willing to risk a dilutive deal to expand its franchise in the state.

In March, 1992, Boatmen's acquired the $700 million-asset Superior Federal Bank in northwest Arkansas in a federally assisted deal that effectively was cost-free.

Analysts say the fast-growing bank is under pressure to avoid the kind of dilutive acquisitions it became known for under past management.

"It certainly makes the math more difficult on these kinds of deals when you have less efficiency to gain," said Joseph Stieven, senior banking analyst at Stifel, Nicolaus & Co., in St. Louis.

Another bank rumored to be interested in Worthen is St. Louis-basedMercantile Bancorp. The company has said it will consider expansion into all neighboring states, but a spokesman declined to comment on possible Arkansas acquisition.

Still, at least one question lingers. Analysts point out that the fight state usury law has forced Arkansas banks to lend only to solid borrowers, resulting in lower loan-to-deposit ratios.

"Growth is the question," said Peter Tuz, analyst at Morgan Keegan & Co. in Memphis. "There's probably a better use of capital for someone like NationsBank than to buy in Arkansas."

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