DATE: Friday, May 2, 1997                   TAG: 9705020597

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY TOM SHEAN, STAFF WRITER 
                                            LENGTH:   89 lines

BANK TO ACQUIRE SECURITIES FIRM N.C. PARENT OF BB&T AGREES TO BUY CRAIGIE INC.

Hoping to gain quick entry into the investment banking arena, the parent of BB&T banks in Virginia and the Carolinas has agreed to buy the Richmond-based securities firm Craigie Inc.

Having the ability to underwrite securities and provide other services will help BB&T banks hold onto corporate and municipal customers, said Burney S. Warren, executive vice president for acquisitions and venture capital at Southern National Corp., the parent of BB&T.

``Other institutions have been calling on our customers and offering them investment banking products'' that BB&T's banks didn't have, Warren said Thursday.

Southern National, based in Winston-Salem, N.C., was attracted to Craigie because it had used the company's services and was familiar with its management, he said.

Another consideration was Craigie's size. With $80 million of assets and $18 million of capital, it would be manageable for Southern National to acquire, Warren said.

``We've had very casual conversations with other securities firms, but we locked onto Craigie,'' he said. ``We determined that this was the company we wanted to do business with.''

The Southern National-Craigie announcement comes amid speculation that many commercial banks are shopping for securities firms in an effort to broaden their services. In early April, the commercial banking company Bankers Trust New York Corp. said it would acquire a highly regarded investment banking firm, Baltimore-based Alex. Brown & Sons.

That deal, valued at $1.7 billion, attracted attention because of the gap it would cut through the Depression-era wall separating commercial banking and investment banking.

In an attempt to restore confidence in the country's battered banking system, Congress passed a law in 1933 that banks could take deposits and make loans or underwrite and trade securities. That measure, the Glass-Steagall Act, barred banks from doing both.

During the past decade, giant commercial banks have lobbied Congress to ease the restrictions, but with little success. However, federal regulators have allowed financially stronger commercial banks to engage in limited amounts of investment banking.

Late last year, the Fed expanded the volume of investment banking that commercial banks could do. That prompted several banks to begin courting securities firms.

``Craigie's board had been approached by a number of institutions about our interest in being acquired,'' said Allen Mead Ferguson, the company's chairman and chief executive officer.

``The board decided to listen to these overtures, and BB&T was by far the most persistent,'' he said. ``They also provided the most attractive offer and cultural fit.''

Conditions for investment banks that specialize in debt underwriting, especially municipal debt underwriting, have gotten much more competitive, Ferguson said. However, Craigie has been profitable and was under no financial pressure to find an acquirer, he said.

The transaction will involve a combination of cash and stock, but the two companies declined to disclose the value.

``It was a very handsome premium over book value'' and in line with what other banks have paid for securities firms, Ferguson said.

Organized in 1929, Craigie has 90 employees and two offices in Richmond and Charlotte. The company has been owned by employees since the mid-1970s when a group bought it from a financial-services holding company that owned Craigie for about five years, Ferguson said.

Craigie, he said, will keep its name and operate as an independent subsidiary of Southern National. The management will remain in place, and he will continue to serve as chief executive, Ferguson said.

Craigie gets about 90 percent of its revenue from underwriting, trading and selling debt securities, including corporate and municipal securities, Ferguson said. About 7 percent comes from underwriting, trading and selling equity securities.

Over the years, Craigie established itself as a major force in the underwriting of municipal debt in Virginia, said Lawrence B. Wales Jr., president of Municipal Advisors Inc., a Virginia Beach consulting firm that advises cities on debt offerings.

Earlier this month, the Virginia Public Building Authority chose Craigie to be the senior manager for the underwriting of a $153 million bond offering by the authority.

Southern National's agreement with Craigie will have to be approved by the Federal Reserve. The banking company has talked with regulators about the planned transaction and doesn't expect to encounter any hurdles, Warren said.

Southern National, which is changing its name to BB&T Corp., has $22.1 billion of assets and 423 bank branches in three states. Its Virginia subsidiary gained a major presence in Hampton Roads two years ago by buying Commerce Bank, the region's largest community bank at the time. Earlier this year, BB&T of Virginia expanded to the Richmond area by buying Fidelity Financial Bankshares Corp., a thrift with seven branches.

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