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SOUTHERN NATIONAL BANK 'A-/F-1' CDS AFFIRMED BY FITCH, OFF ALERT -- FITCH FINANCIAL WIRE --

 NEW YORK, Jan. 18 /PRNewswire/ -- Southern National Bank of North Carolina's "A-/F-1" long- and short-term certificates of deposit are affirmed by Fitch and removed from FitchAlert, where they were placed with negative implications on Aug. 10, 1993, following Southern National Corp.'s (SNB) announcement of its intention to merge with The First Savings Bank. The credit trend is stable.
 The acquisition of The First, based in Greenville, S.C., represents SNB's largest merger to date, adding over $2 billion in total assets. Principal concerns related to the transaction were the nonperforming assets in The First's portfolio and increased leverage that would result from the merger. SNB has reached a contractual agreement to sell $109 million of performing and nonperforming assets (NPAs) immediately subsequent to its merger with The First on Jan. 28, 1994. The bulk sale of these assets will enable SNB to report pro forma NPAs of approximately $50 million, representing an estimated ratio of NPAs to loans and related assets of 1.00%. This ratio is slightly higher than SNB's ratio of 0.63% at Dec. 31, 1993, but significantly below the 2.50%-plus ratio that would have been reported if not for the bulk sale.
 The asset sale removes significant uncertainty regarding the acquisition's impact on SNB's future earnings and asset quality. In addition, and perhaps more importantly, the asset disposition will permit SNB management to focus on integration of The First and earning asset growth priorities.
 The asset sale will require a larger writedown in The First's year- end quarter than originally anticipated. The after-tax special charge will increase to approximately $93 million from the previously announced $77 million estimate. In addition to credit-related expenses, this charge will include writedowns of goodwill and other intangibles, severance payments, and systems. Upon acquisition, SNB's leverage, Tier 1 risk-based, and total risk-based capital ratios will be reduced to approximately 7.0%, 12.0%, and 13.0%, respectively. These ratios are acceptable and should improve, as earnings and capital formation at SNB should be unaffected by credit-related expenses. Pro forma loan loss reserve coverage of nonperforming loans will be sufficient at approximately 130%.
 SNB's strong 1993 performance was highlighted by improved core earnings and further asset quality improvements. Return on average assets improved to 1.35% last year, aided by lower credit expenses and good operating efficiency. Rating concerns remain focused on the company's operation in the highly competitive Carolinas' banking market and SNB's low level of fee revenues. Fees represented only 18% of total 1993 revenues, but the company has initiated strategic efforts to build non-interest income.
 -0- 1/18/94
 /CONTACT: Scott J. O'Donnell of Fitch, 212-908-0531/
 (SNB)


CO: Southern National Corp.; Southern National Bank of North Carolina ST: North Carolina, South Carolina IN: FIN SU: RTG

LG -- NY103 -- 2893 01/18/94 15:42 EST
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Publication:PR Newswire
Date:Jan 18, 1994
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