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RBC Centura To Acquire 39 Bank Branch Offices In Alabama

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RALEIGH, N.C. — RBC Centura is expanding its footprint in the southern United States for the second time in four months with a deal that could have cost more than $2.5 billion, according to one analyst.

The Raleigh-based subsidiary of Royal Bank of Canada said Wednesday evening that it was acquiring 39 branch offices of AmSouth Bank in Alabama. AmSouth agreed to sell the branches in order to receive federal regulatory approval for a merger with Regions Financial Corp. Both AmSouth and Regions are based in Birmingham, Ala.

“This is an opportunistic move,” an RBC Centura spokesperson told WRAL.com, citing AmSouth’s need to sell the branches. She described the markets and branches involved in the deal as “particularly attractive.”

Terms of RBC Centura’s acquisition were not disclosed.

However, Tony Plath, a professor of finance at the University of North Carolina at Charlotte who closely follows the banking industry, said the deal likely cost RBC Centura $2.5 billion or more. He based his estimate on what he called other “mid-tier” banking acquisitions in the Southeast.

“They likely paid a 30 percent premium,” Plath told WRAL.com. Similar deals cost the acquiring banks between 1.2 and 1.3 times desposits. RBC Centura said the 39 branches in is acquiring have deposits of $2 billion and loans of $1.5 billion. “I would estimate they paid between $2.5 billion and less than $3.5 billion.”

“That’s a good book of business,” Plath said of the deposits and loans AmSouth sold.

Some 350 people work at the branches, the RBC Centura spokesperson said.

Most of the offices – 22 – are in the vicinity of Mobile, Ala. Most of the others are located in Huntsville, Montgomery, and Tuscaloosa metropolitan areas.

The Alabama acquisition is a smart one for RBC Centura and AmSouth, according to Plath.

“This makes sense for two reasons. It makes sense for AmSouth because they are selling to a brand name that is largely unknown in Alabama,” he explained. “Second, RBC Centura has to grow.”

In August, RBC Centura acquired Flag Financial Corporation, which operates 17 branches in the metro Atlanta area. That deal is still in the process of closing. The Flag deal included $1.4 billion in deposits and $1.3 billion in loans.

RBC Centura also recently broke ground for a new headquarters tower in Raleigh. It is scheduled to open sometime in 2008.

“This is an exciting time,” the spokesperson said of RBC Centura’s continuing expansion. “We have strong organic growth, and we also are committed to an (external) growth strategy.”

RBC Centura’s move of its headquarters, the replacement of top management in its Florida banks, and the two acquisitions show that the bank is determined to improve its performance, Plath said. “Their performance has been lackluster, but they have picked up market share in Florida, and they have made the acquisitions in Georgia and Alabama,” he added.

The AmSouth deal is expected to close in March of next year.

"Alabama is a strategic and logical extension of our current footprint and banking center network," said Scott Custer, RBC Centura’s chief executive officer, in a statement. "Key Alabama markets closely resemble other diverse and growing markets in which RBC Centura has had a long-time presence and solid understanding.

"This acquisition provides us with an attractive client and business base that supports RBC Centura's overall strategy of disciplined, affordable investments to expand our distribution network," he added.

RBC Centura said it would offer jobs to all employees of the branches to be acquired.

The additional branches would increase RBC Centura’s total by more than 10 percent. It now operates 270 centers.

RBC Centura, which has some $20 billion in assets, operates branches in Virginia, the Carolinas, Georgia and Florida.

AmCorp is selling an additional 13 branches to other banks as part of the requirements laid out for approval of its $10 billion merger with Regions Financial Corp. Six branches in Mississippi are to be acquired by Citizens Bank of Alabama, and seven branches in Tennessee are to be acquired by First Bank of Tennessee.

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