NATIONSBANK OFFERS LONG-TERM STOCK VALUE

With about 2,600 offices in 16 states and Washington, NationsBank is the third largest U.S. bank. Its stock is listed on the New York Stock Exchange under the symbol NB and appears to be a good value investment for long-term investors. A little over a year ago, I was saying the same thing about both Boatmen's Bancshares and NationsBank and we all know what happened there.

NationsBank's roots are set deep in North Carolina and can be traced back to the founding of Commercial National Bank in 1874. In 1957, it merged with American Trust Co., which had started business as Southern States Trust Co. in Charlotte in 1901. With the merger, it was renamed American Commercial Bank, and two years later merged with First National of Raleigh becoming a statewide bank. In 1960, North Carolina National Bank was formed with the merger of American Commercial Bank and Security National, which was founded in Greensboro, N.C., in 1933. North Carolina National Bank formed NCNB Corp., a holding company, in 1968 and by 1970 had 91 offices in 27 cities. NCNB was the largest bank in North Carolina by 1980.

NCNB made its first foray into Florida in 1982 acquiring First National Bank of Lake City and had 200 offices in Florida alone by 1988.

With Hugh McColl at the helm, NCNB became the first southern banking operation to span six states. It took advantage of S&L failures in the late 1980s and early 1990s by managing assets and branches in addition to acquiring failed thrifts. It acquired 20 percent of Texas's largest bank, Republicbank, in 1988 and 1989 after the FDIC chose to manage this failed bank. As we know, under the leadership of Andrew B. Craig III, it has continued to grow by acquisition and good management.

The two most recent acquisitions, Boatmen's Bancshares and Barnett Banks, are fresh on our minds. The acquisition of Boatmen's gave NationsBank a presence in Cape Girardeau and Jackson where it operates six facilities and employees about 120 "associates." The terms of the acquisition of Barnett Banks were approved by the Federal Reserve Board of Governors Dec. 10, and it is expected to close in January.

After a failed attempt to enter the securities business in a joint venture with Dean Witter, NationsBank acquired Montgomery Securities this year, renamed the operation NationsSecurities and announced Florida managerial appointments Dec. 11.

I would be remiss if I did not also mention the fact that NationsBank also has offices in a dozen foreign countries.

NationsBank's stock is trading at $59 with a P/E of 13 while the market average P/E for stocks with positive earnings is about 26. Based on market P/E, this stock could be expected to sell for about $118. My research suggests that it would be more appropriately priced at about $85. Part of the huge difference between my estimate of price and the market P/E estimate of price is due to the capital structure of banks and their unique exposure to interest rate risk. A bank is well within its limits with only 10 percent of total assets financed with equity while we expect most other businesses to have something nearer 70 to 80 percent equity depending on the industry.

I do not currently own NationsBank's stock, but I do believe that the numbers indicate that this is a good stock for long-term investors to consider adding to their portfolios. It appears to be underpriced, and it is paying a 2.6 percent dividend with about 30 percent of earnings. The company's record of making sound acquisitions and providing good management is a good indication for the future. Keep in mind that there is always risk associated with common stock investments, and you need to be prepared to weather the downs as well as the ups in the market.

Reinvestment Plan: Yes

Web Site: http://www.nationsbank.com

Bill Walker is president and CEO of Walkrich Investment Advisors and completes a market appraisal of over 5,000 common stocks eachweek. (573) 651-9196 (Walkrich@mvp.net)

The Southeast Missourian does not recommend that readers buy or sell stocks featured ikn this column, which is provided for informational purposes only.