United Community Banks in Blairsville, Ga., is eager to join an elite group of rollup companies in the Southeast region.

The $9.5 billion-asset company, which suffered credit problems during the financial crisis tied to soured real estate loans, has roared back to life with a focus on specialty lending and a renewed desire to pursue acquisitions.

United's executives are hoping to become a premier acquirer in Georgia, Tennessee and the Carolinas as it prepares to vault over the $10 billion-asset threshold that triggers heightened regulatory scrutiny such as mandatory stress tests and caps on interchange fees.

United could face challenges competing with other well-known serial acquirers, such as Home Bancshares in Conway, Ark., and Bank of the Ozarks in Little Rock, Ark., that have higher multiples, industry experts said. That may require United to make a stronger case to a seller that it offers the best long-term upside.

"They're in the early stages of their newfound M&A strategy," said Michael Rose, an analyst at Raymond James. "Their currency has improved, but they're not as competitive as some others. Still, they could be part of the emerging class of new entrants into the M&A space."

During the last downturn, United had to sell or restructure hundreds of millions of dollars of problem real estate and construction loans, losing more than $900 million over a period of several years. In recent years, however, management has expanded in areas such as Small Business Administration lending, while completing two bank acquisitions.

United marked the transition by recently hosting its first investor day since 2007, where management outlined a plan to get roughly half of its growth through acquisitions, noting that they have identified 50 potential takeover targets across four states.

M&A is a way to spread costs over a larger asset base, while also removing competitors, said Chris Zych, United's director of mergers and acquisitions. United is primarily keen on buying small, healthy banks that tend to be less risky and take less time to integrate, but Zych said the company is also open to acquiring troubled institutions.

United will likely place a greater emphasis on South Carolina, industry experts said. Earlier this year, United bought the $1.2 billion-asset Palmetto Bancshares in Greenville, S.C.

Lynn Harton, United's president and chief operating officer, already works out of Greenville, where he ran South Financial Group before its 2010 sale to Toronto-Dominion Bank. Harton has long been viewed as the eventual successor to United's chairman and chief executive, Jimmy Tallent.

"South Carolina is a market where they can leverage their infrastructure," said Matt Olney, an analyst at Stephens. Harton "knows South Carolina well and has contacts there, which puts them in a good spot. It's becoming clearer that Lynn is the future of the company."

United could rely on smaller deals for now, but management might look for something larger as the $10 billion-asset threshold looms, said Kevin Fitzsimmons, an analyst at Hovde Group.

United's management estimated that the company could lose $9 million in interchange income and add up to $2 million in compliance-related expenses when it reaches $10 billion in assets.

Executives are making preparations as though the company will pass $10 billion of assets next year. United is open to doing a larger, transformative deal, but those are difficult to find and execute.

"There are also fewer opportunities and they're more difficult," Harton said during the investor day. "You can't build your business plan around it or you're just going to be sitting there dead in the water. So, the core business plan is, first of all, to focus on organic growth, focus on these 50 [targeted] banks. … We'd absolutely be open to transformational deals that came about."

Southeastern banks that could qualify as transformational partners include the $12.2 billion-asset Trustmark in Jackson, Miss.; the $7.8 billion-asset Renasant in Tupelo, Miss.; and the $6.5 billion-asset Pinnacle Financial Partners in Nashville, Tenn. Still, industry experts said there is no indication that a deal is in the works with any of those companies.

Yadkin Financial in Raleigh, N.C., which on Tuesday announced a deal that will take it to $7 billion in assets, noted in a presentation that there are only 14 banks across 10 Southeastern states that have $5 billion to $10 billion in assets.

"United has come to the conclusion that size does matter and there's an advantage in being larger," Fitzsimmons said. "They have built an infrastructure that can hold a much larger bank and they see plenty of runway out there if they just did small and midsize deals."

United's stock, however, trades at a lower multiple than other serial acquirers, which could create a challenge in a bidding situation, Fitzsimmons said. Instead, the company might have better success targeting sellers looking for more of a long-term return, he said.

"There are some rollup acquirers out there and some of them trade at higher multiples than United," Fitzsimmons said. "But I think that, at the end of the day, they feel that a handful of acquirers can't realistically buy everyone." 

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.