First Horizon National Corp. should expect no shortage of interest in the nearly three dozen retail branches in Dallas, Atlanta, and the Baltimore/Washington region that it plans to divest.
The Memphis company says it is losing money on the branches, all of which have been open for less than four years. Industry watchers said the list of banks looking to pick up branches and deposits in some of the most coveted markets in the country is likely to include in-state banks, out-of-state banks, new banks, rural banks, and banks already in those markets that want to keep others out. Related Link
Ten of the branches on the block are in the Dallas/Fort Worth area, 13 are in Baltimore and northern Virginia, and 11 are in metropolitan Atlanta. They have deposits of about $521 million.
Charles Burkett, First Horizon's president of Tennessee and national banking, said the branch sale "is the right move for us because … we are doing everything we can to improve our profits as quickly as possible."
First Horizon's second-quarter profit fell nearly 80% from a year earlier, a decline the company partly blamed on the cost of its recent expansion outside of Tennessee, where it has about 180 branches, and Mississippi, where it has eight.
The former First Tennessee National Corp. took its current name to reflect its nationwide ambitions, though it still uses the First Tennessee Bank brand in its home state. It lost about $10 million on its out-of-market branches in the second quarter.
"Full-service banking has a longer turnaround time on profitability than we have an appetite for right now," Mr. Burkett said.
Selling the branches as a single package would be "most desirable," he said, "but if that doesn't work and there are buyers in certain markets, then we would look at that as well."
Chief executives at the $2.1 billion-asset Union Bankshares Corp. in Bowling Green, Va., and the $2.9 billion-asset Sandy Spring Bank in Olney, Md., said they would like to take a look at the Middle Atlantic package.
First Horizon's Virginia branches are primarily in the northern part of the state, where both Union and Sandy Spring are expanding. Union has a deal to buy six northern Virginia branches from Provident Bankshares Inc. of Baltimore, and Sandy Spring moved into the market this year when it acquired a small bank in Fairfax.
"That part of Virginia is in our primary area for growth," said G. William Beale, Union's president and CEO. "So I would certainly think that we would be interested in looking at the package when it's available, as I suspect a lot of others will."
"We are definitely in the desire-to-expand kind of mode, and particularly in northern Virginia," said Hunter Hollar, Sandy Spring's president and CEO. The package of First Horizon branches is "something we are going to see...if we are interested in."
One company unlikely to bid on the Middle Atlantic package is the $43 billion-asset Commerce Bancorp in Cherry Hill, N.J., which has been actively expanding in the region. It generally prefers building over buying, and though an acquisition could quicken its growth in the market, executive vice president C. Edward Jordan Jr. said Commerce plans to stick with its strategy.
"All of our suburban branches are single-branch prototype buildings," he said. "We think that's very important as part of the brand. It's just like McDonald's golden arches; there just gets to be a point where you can take down the sign and you recognize the buildings."
First Horizon intends to retain two branches in north Georgia, but those it is selling in the Atlanta area could be attractive to larger banking companies seeking to protect their turf, said Christopher Marinac, an analyst at FIG Partners LLC. in Atlanta.
One such bidder could be the $25 billion-asset RBC Centura Banks Inc. in Raleigh. The Royal Bank of Canada unit has 54 branches in Georgia and its CEO, Scott Custer, said that though he is not sure the branches would be a good fit, he is interested in looking at what First Horizon is offering.
"Atlanta is a great market," Mr. Custer said. "Everybody wants to be there. If you are already there, you want to be bigger."
As for the Dallas/Fort Worth branches, Chris Murray, a managing director at Sandler O'Neill & Partners LP, said he would expect most of the interest to come from such regionals as BOK Financial Corp. in Tulsa, Cullen/Frost Bankers in San Antonio, and Whitney Holding Corp. in New Orleans.
BOK and Cullen/Frost said they do not comment on potential acquisitions, and Whitney did not return phone calls.
The $4.4 billion-asset Sterling Bancshares Inc. in Houston could be in the mix as well.
Sterling declined to comment specifically on the First Horizon package, but in its second-quarter earnings conference call last week, J. Downey Bridgwater, its chairman and CEO, said that he has talked with banks in the Dallas area.
He said Dallas is less competitive than Houston because it has had fewer start-ups.
"There are some acquisition targets in that market that we are interested in and would love to continue to have conversations with," Mr. Bridgwater said.
Curtis Carpenter, a managing director with Sheshunoff & Co. in Austin, said he sees two types of buyers emerging for the Dallas/Fort Worth branches: "New banks that raised a lot of equity and are looking to grow quickly may see it as an opportunity to get some scale with one transaction … and banks already in the metroplex that are looking to get more storefronts and locations in the area they are already serving."
The $2.1 billion-asset American State Bank in Lubbock has one branch in the Fort Worth area, and executive vice president Harry Zimmerman said it wants more.
The package of First Horizon branches "is something I would sure like to check into," he said.
