news from the north carolina banking sector. Triangle will be most likely taken over buy any one of these names you see below. I know the lawyer who put the deal up. Investors business daily had acrt on its industry section, with wtec.
Top Stories
Don't Be Fooled!
First Citizens is no Takeover
Target
January 16, 1997
When Southern National (SNB:NYSE) agreed to
acquire North Carolina rival United Carolina
Bancshares (UCAR:Nasdaq) in November, investors
rushed in looking for the next takeover play in the
Tarheel state.
But instead of sifting through the stocks, some
investors bought blindly. And what many came up with
was Raleigh-based First Citizens BancShares
(FCNCA:Nasdaq).
"People said, 'Buy me a North Carolina bank. I really
don't care which one,'" says David B. Sochol, an
analyst with Legg Mason Wood Walker in
Baltimore, which hasn't done underwriting for First
Citizens. But First Citizens isn't just another North
Carolina bank bound for takeover land.
The most important factor to look for when buying a
stock as a takeover play is to make sure it can be
taken over. First Citizens most likely can't. The
Holding family holds a majority of the stock and has no
interest in selling, according to those familiar with the
company. "It's more of a dynasty, a hand me down to
the next generation, and the next generation is coming
into management," Sochol says.
Before the Southern National announcement, First
Citizens' stock was trading at 68 1/2. After the Nov. 4
announcement, it rocketed up, reaching a 52-week
high of 83 on Dec. 4, though it has settled down a bit
since, closing unchanged at 75 Thursday.
"It's fairly to fully priced," says Sochol. Its current price
puts it at about 1.2 times its book value, below today's
2 times book value for most regional banks. But
Sochol notes that it deserves that discount because any
outside investor is a minority holder. Most banks don't
have a controlling shareholder.
Other qualities, however, are attractive. It sports a
strong branch network in North Carolina, where it
ranks fifth in assets behind such banking powerhouses
as NationsBank (NB:NYSE), First Union
(FTU:NYSE) and Wachovia (WB:NYSE). It has had
solid earnings growth. In the nine months ended Sept.
30, its net income climbed to $45.6 million, or $4.03 a
share, from $40.6 million, or $3.85 a share, in the
year-earlier period. And the most recent nine-month
period included a $6.4 million charge for a one-time
assessment for deposits insured by the Savings
Association Insurance Fund. First Citizens hasn't yet
reported fourth-quarter earnings. It's expected to do
so Jan. 27.
But First Citizens is by no means a high flyer. Its return
on assets for the nine months ended Sept. 30 was
0.80%, below the benchmark 1% level. The
company's return on equity was 10.71%, well below
the 17% to 20% level top banks are hitting today.
In an age of big acquisitions, First Citizens takes its
expansion efforts in baby steps. For instance, it is
entering Georgia by opening a one-office thrift.
"Here there's a great focus on safety and soundness,"
says Sochol. Indeed, a First Citizens spokesman notes
that the banking company invests its reserves in
low-yielding Treasury securities.
So investors looking for a takeover play should look
somewhere else. Says Sochol, "At best, it's premature
takeover speculation. More likely it's pie in the sky."
By Erle Norton
enorton@thestreet.com
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