Magazine article American Banker

Competition Puts Crimp on Bank South Shares

Magazine article American Banker

Competition Puts Crimp on Bank South Shares

Article excerpt

Competition Puts Crimp On Bank South Shares

Recent declines in the price of Bank South Corp. stock offer evidence that being the No. 1 independent bank in a market matters less than being No. 4, behind superregional competitors.

"Investors are beginning to think like bankers do," said John Mason, a securities analyst with Interstate/Johnson Lane in Atlanta, where Bank South is located. "They'll put a high premium on No. 1 in a market, maybe No. 2, but after that, they get glassy-eyed," he said.

In terms of market share, Bank South trails the Atlanta units of C&S/Sovran Corp., Wachovia Corp., and SunTrust Banks Inc. Despite assets of $5.1 billion, Bank South is not a tempting target for an outsider seeking a foothold in Atlanta.

Nevertheless, investors' enthusiasm for the bank has not waned completely. Even though its 7% ratio of nonperforming assets to total loans and real estate owned is one of the region's highest, Bank South still trades at 67% of its book value of $8.89 a share. Some other regional banks with better nonperforming asset ratios, such as First Florida Banks Inc. and Hibernia Corp., sell at low prices relative to book value.

Bank South executives take this as a sign that investors still attach value to independence, even in a crowded market. "We have a premium in our stock primarily because of the franchise," said chief financial officer Ralph E. Hutchins Jr.

But a surge in problem loans last year produced a $2.4 million loss, causing Bank South's stock to tumble from its high of $12. …

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