Two acquisitive regional banks announced multibank deals this week in an effort to strengthen market share in competitive states.
Continuing its aggressive pace of mergers, Zions Bancorp. of Salt Lake City said Wednesday it would acquire two Denver-based banking companies for a combined $200 million.
The announcement came one day after Birmingham, Ala.-based Regions Financial Corp. agreed to pay a total of $224.5 million to buy a bank and a thrift in South Carolina.
The multiple acquisitions shows how dramatically the pace of deal-making is picking up. Larger transactions across the country, announced by some of the biggest regional banks, are lighting a competitive fire under the mid- tier banks, analysts said.
Zions agreed to buy $660 million-asset Vectra Banking Corp. and $130 million-asset Tri-State Finance Corp. for 3.8 times combined book value, or 18.5 times estimated 1998 earnings. Both purchases are expected to close in the first quarter.
Zions officials indicated Vectra was the more expensive of the two, and analysts said the company likely sold for something more than 4 times book value. But, they said, the prices were difficult to gauge because Tri- State is privately held. Zions said the two mergers were not contingent on each other.
The acquisitions will mean a larger presence across Colorado for $8.5 billion-asset Zions, particularly in Denver and Boulder. The addition of the companies would move it from No. 17 in Colorado market share, with $370 million of deposits, to No. 6, with more than $1 billion of deposits.
Zions president and chief executive officer Harris H. Simmons said the deals would give the Utah company a foundation on which to build. Zions operates three banks in Colorado: Valley National Bank of Cortez, Centennial Savings Bank, and Pitkin County Bank and Trust.
Mr. Simmons said his company plans to merge those banks with Vectra and Tri-State. The new Colorado bank will not bear the Zions name, however. Mr. Simmons said he wants to create a bank that isn't viewed as an outsider.
Colorado's banking market is currently led by two Minneapolis banking companies, Norwest Corp. and U.S. Bancorp., which hold more than 30% of the state's deposits.
Most of Vectra's management will remain in place, Mr. Simmons said.
With its two mergers, Regions would have more than $1 billion of assets and 30 offices in South Carolina. In the larger of the two, $21.2 billion- asset Regions said it agreed to buy Aiken-based Palfed, a $664.9 million- asset thrift that operates 22 bank branches and seven mortgage lending offices in South Carolina. Palfed operates an eighth mortgage lending office in Georgia. The deal is valued at about $144.7 million, or 2.6 times Palfed's book value.
On the same day it announced the Palfed deal, Regions also said it would pay $79.8 million, or 3.9 times book value, to buy First United, based in Anderson, S.C. That $292 million-asset company would bring eight banking offices and a small consumer finance company in South Carolina.
Regions last month announced it would enter South Carolina through the purchase of $134 million-asset Greenville Financial Corp. for $33.5 million.
J. Stanley Mackin, Regions chairman and chief executive officer, said his company's rapid move into South Carolina is part of an aggressive overall acquisition plan. South Carolina is a "natural extension" of Region's north Georgia operations and provides the company with "explosive" growth opportunities, he said.
"This is market-driven," said Mr. Mackin. The corridor surrounding Interstate 85, a highway that runs from Montgomery, Ala., to Richmond, Va., through Georgia and the Carolinas, "has seen tremendous industrial development. It's awakened that whole area."
Regions has been on an acquisition tear, adding $1.8 billion of assets in eight deals this year. The three deals pending in South Carolina, combined with another in Georgia, will add $1.2 billion of assets to Regions by the first quarter.
Though primarily an Alabama banking company, Regions has been extending its influence throughout the Southeast. More than 50% of the company's assets are still in Alabama, but about 21% are in Georgia, 12% in Louisiana, 8% in Florida, and 2% in Tennessee, said Ronald C. Jackson, Regions' assistant controller.
"They are moving toward fulfilling their name in terms of covering the Southeast," said Ken Hemauer, an analyst with Robert Baird & Co., Milwaukee. "They have been very active acquirers, more so than most other companies in the region."