BancorpSouth's acquisition of LF Bancorp indicates that bank consolidation is gaining ground in Mississippi after years of relative quiet, bankers and analysts say.
"I think it'd be safe to say there's a consolidation movement on in Mississippi, as there is across the country," said Harry Baxter, an executive vice-president at BancorpSouth. "And it may become more of a consolidation from outside the state after the interstate banking bill passes."
BancorpSouth, which has $2.4 billion of assets, said it signed a binding agreement last Tuesday to purchase LF Bancorp, which is based in Laurel, for about $27.4 million in stock.
LF Bancorp, with $192 million of assets, is the holding company for Laurel Federal Savings and Loan Association, the second largest thrift in the state.
The acquisition makes strategic sense for Babcorpsouth because it extends the Tupelo-based bank into one of two markets left in Mississippi where it did not have a presence. Laurel Federal is the second-largest bank in Laurel, controlling 21% of deposits.
But Mr. Baxter said BancorpSouth also had its eye on the national interstate banking bill now being considered in Congress. If that legislation passes this year, as expected, Mississippi would be open to bank acquisitions from other areas of the country, rather than simply nearby southeastern states, as is the current situation.
"It's not the driving motivation, but it is a factor," Mr. Baxter said. "If we don't do well, the likelihood of somebody coming in and picking you off when you have a good franchise like ours increases."
BancorpSouth's purchase of LF Bancorp is the fourth major acquisition in Mississippi this year. The largest deal was struck on July4, when Memphis-based Union Planters Corp. bought Grenada Sunburst System Corp., a $2.5 billion-asset holding company based in Grenada.
In addition, Mississippi's two largest bank holding companies, Deposit Guaranty Corp. and Trustmark Corp., both of Jackson, have each purchased a community bank in Columbus for Deposit Guaranty, and in Vicksburg for Trustmark.
E.B. "Bud" Robinson, chairman and CEO of Deposit Guaranty, said community banks in the. Magnolia State may feel more incentive to sell out now because national interstate banking will shift the focus to larger acquisitions. "Some small banks may feel this is a window that could close," Mr. Robinson said.
He also pointed out that community banks that sell out to a larger Mississippi company may enjoy a "double dip" premium on their stock: once when they sell to the Mississippi bank, and again when the Mississippi bank is acquired from out-of-state.
Analyst Kathryn Bissette. with Sterne, Agee & Leach in Atlanta, believes other out-of-state banks will emulate Union Planters. "There will be additional acquisitions of the larger Mississippi companies by banks outside the state." she said.
Mississippi bank stocks did run up after Union Planters announced its Grenada Sunburst deal. Deposit Guaranty, which is considered a proxy for Mississippi bank stocks in general. surged from $29.50 to $31.25 a share, and recently traded at $32.25.