First Union Is Picked to Buy Southeast Corp.
First Union Corp., a major banking power in the Southeast, was selected from among several bidders to purchase ailing Southeast Banking Corp. of Miami, the Federal Deposit Insurance Corp. said Thursday.
The merger will create the 11th-largest bank group in the nation. It is the latest in an unprecedented wave of consolidations within the bloated industry as banks try to survive hard times.
Among the banks that have gained strength are NCNB Corp. It said in July that it would buy C&S;/Sovran to create the No. 4 bank in the nation and be an even fiercer competitor of First Union. Both NCNB and First Union are based in Charlotte, N.C.
Southeast has been struggling with mounting real estate loan problems. It lost $200 million in 1990 and $263 million in the first half of 1991. It has been borrowing heavily from the Federal Reserve in recent months, according to the trade paper American Banker.
The FDIC said the deal will cost the bank insurance fund $350 million. The fund, which insures most U.S. bank deposits, is likely to be broke by the end of the year and need a cash injection from the federal government.
Industry analysts say the purchase will give First Union a much-wanted presence in the Florida market.
First Union will retain ownership of the failed bank’s problem loans, but the FDIC said it will reimburse the bank for 85% of the net losses due to bad loans during the next five years. The bank will absorb the remaining 15%.
In January, Southeast got a new chairman, Douglas Ebert, who analysts said has fought valiantly to return Southeast to health by cutting costs and selling assets. Southeast was once one of the region’s premier banks, catering to corporate clients.
The Federal Deposit Insurance Corp. gave up hope for the bank and began looking for a buyer. Other bidders reportedly were Barnett Banks Inc. of Jacksonville, Fla., and SunTrust Banks Inc. of Atlanta.
Southeast at the end of June had $13 billion in assets, while First Union had $37 billion in assets.