Johnny Allison cashed in big on the Texas banking crisis of the 1980s, acquiring some $2 billion of bad assets from the old Resolution Trust Corp., and parlaying it into $30 million a year in income after the sector recovered five years later.
So when the chairman of Home Bancshares in Conway, Ark., sees what has happened in the Southeast over the past five years, he can't help but feel like it's déjà vu all over again.
"This is my second bite at the apple," says Allison, who has acquired five failed banks and one ongoing concern in Florida, and now boasts about $1.7 billion in assets and 40 branches there. "I have no reason to believe it won't be as successful as the first."
In the stretch run of a financial crisis that has spawned upwards of 200 bank failures in the southeast and left hundreds more struggling to stay afloat, there's a less talked about story of rebirth, growth and opportunism bubbling beneath the surface.
A handful of strong mid-cap regional banks, most of them based in what has long been viewed as the dull patch between still-high-in-the-saddle Texas and the heretofore-dynamos of Florida and Georgia, is capitalizing on the carnage.
They've survived the crisis in relatively good shape and have lots of capital. Now they're moving east, buying banks, opening de novo offices, stealing customers from crippled rivals and building share in areas hit hard by the crisis, betting on a rebound down the road. In doing so, they are changing the competitive dynamics of the region, along with some long-held perceptions.
"Before the downturn, the banks in Louisiana, Arkansas and Mississippi were criticized for not growing fast enough, while the ones in Florida, Georgia and the Carolinas were the high-multiple, growthy banks that everyone wanted to talk about," says Kevin Fitzsimmons, an analyst with Sandler O'Neill and Partners.
"Now, with all the stress and failures in those states, it's those banks from safer, slow-growth markets that are emerging as the new mid-cap class of the Southeast," Fitzsimmons adds. "It's very ironic."
The protagonists in this redemption tale include the likes of Iberiabank of Lafayette, La., Hancock Holding Co. of Gulfport, Miss., Trustmark of Jackson, Miss. and Little Rock-based Bank of the Ozarks-all solid, if uninspiring, regional banks whose home markets lie firmly in the Southeast, yet west of devastated Florida and Georgia.
They aren't huge, at least not yet. Hancock, at $19 billion in assets, is the largest.
None are household names outside of their home markets. Even today, most bankers in Florida or Georgia don't know very much about them. But they've been relatively strong performers through the crisis, and now live in a bizarre, parallel universe where capital is plentiful, allowing them to bulk up on the cheap.
"A lot of banks got hurt because they showed up in Florida near the end of the cycle. Instead of buying low and selling high, they bought high and got hammered," says Daryl Byrd, Iberiabank's CEO since 1999. "We waited for the cycle to completely end, which has enabled us to buy low."
Bill Valenti, chairman and CEO of Florida Gulf Bancorp in Ft. Myers, Fla., remembers the day in November 2009 when Iberiabank bought the failed Orion Bank, based a half-hour south in Naples. "We all kind of looked each other and said, 'Who is Iberiabank?'" he recalls with a chuckle.
Today, Valenti knows plenty about the $12 billion-asset Iberiabank, including its developing taste for the Sunshine State's banking market. In March, he agreed to sell Florida Gulf, one of the few southwest Florida banks to survive the crisis intact, to Byrd's bank for $44.5 million.
"These guys are at a sweet spot in the market," Valenti says of the mid-caps. "They have enough size so that they can get some genuine efficiencies, but they're not so big that they're constantly up in Washington testifying before a House subcommittee."
Many of the more ambitious regionals are run by folks like Allison, who not only survived a devastating energy and real estate bust in the late 1980s but learned from the experience that once-in-a-generation opportunities come along when the environment is at its toughest.
"If you look over our 115-year history, we've always grown the most during the worst of economic times," says Carl Chaney, CEO of Hancock, which recently doubled its assets with a $1.8 billion deal for New Orleans-based Whitney Holding Corp. "By operating on a conservative basis and maintaining what some people think is a larger-than-necessary capital base, you can take advantage of the opportunities when difficult times arrive."
Another way to view things: banks in slow-growth states like Louisiana and Mississippi didn't fetch the stock multiples needed to buy into then-white-hot markets where some banks traded hands for more than four times book value.
But there's no escaping that their home markets lack the glamor, growth and long-term demographics of Florida or Georgia. As smart as their management teams were in not pursuing an expansion there in the last decade, they're even smarter to pursue one now, analysts say.