CapitalSouth Bancorp (NASDAQ:CAPB) and privately-held Monticello Bancshares, Inc. today announced that the companies have signed a definitive agreement to merge Monticello with CapitalSouth. Monticello is the holding company for Monticello Bank, a federally chartered savings bank with two locations in Jacksonville, Florida. The company also operates a wholesale residential mortgage operation based in Fitzgerald, Georgia, which originates and sells prime conventional residential mortgage loans in Florida, Georgia, North Carolina and South Carolina. Terms of the merger call for Monticello stockholders to receive 1,047,619 shares of CapitalSouth common stock, $14 million in cash and $8 million in debt in exchange for all of Monticello's outstanding common stock. The transaction, which is subject to regulatory approvals by the Federal Reserve Board and the Alabama State Banking Department, as well as approval by the stockholders of both companies, is expected to close in the third quarter of 2007, CapitalSouth said. At year's end, Monticello had total assets of approximately $228 million, a loan portfolio totaling $205 million, total deposits of $156 million, and stockholders' equity of $20 million. When the merger is completed, CapitalSouth is expected to have total assets of almost $730 million, net loans outstanding of approximately $576 million, deposits of approximately $557 million, and stockholders' equity of about $61 million. "We believe this represents a great opportunity to expand our presence in the Jacksonville market with an institution that has a significant deposit and lending operation in place," stated W. Dan Puckett, CapitalSouth Bancorp Chairman and Chief Executive Officer. "In our view, Monticello's management and culture represent a good fit with our own, which should give us added momentum as we build our presence in fast-growing Jacksonville. Since our initial public offering in late 2005, one of our key strategies has been to expand in high-growth, demographically attractive markets, and Jacksonville has been at the top of our list." Puckett noted that CapitalSouth presently has one branch office in Jacksonville, which opened less than a year ago, and has announced plans to build a second branch there. With this transaction and the opening of that branch, CapitalSouth expects to have four strategically located branches in the metropolitan Jacksonville area by early 2008. Puckett also pointed out that Monticello's mortgage operations will give CapitalSouth added market visibility as it continues to pursue expansion opportunities. CapitalSouth Bancorp is a bank holding company operating nine full-service banking offices and one loan production office through its bank subsidiary, CapitalSouth Bank, with offices in Birmingham, Huntsville, and Montgomery, Alabama, and Jacksonville, Florida, as well as a loan production office in Atlanta, Georgia. For more information, visit http://www.capitalsouthbank.com.