Hancock Bank in Gulfport, Miss., has, with its agreement this week to buy a second insurance agency, joined the throng of banks that are aiming to boost fee income by enlarging their insurance businesses.
The $4.8 billion-asset banking company has a deal to buy J. Everett Eaves Inc., a New Orleans-based agency, and make it a division of Hancock Insurance Agency. Eaves' annual revenue of $3.9 million would about double the bank's insurance business, to nearly $8 million of annual revenue.
The deal comes after Hancock's purchase last year of Ross-King-Walker Inc., a Hattiesburg, Miss., agency. Carl Chaney, the bank holding company's chief financial officer, said Eaves' office sites make it especially valuable.
"With where J. Everett Eaves is positioned in the metro New Orleans market - with a downtown and a North Shore office - this puts Hancock on the radar screen as far as being a competitor in the metro market," he said. "This is a big deal for us."
The banking company is looking for additional acquisitions within its footprint, Mr. Chaney added. Hancock, from its Gulfport base, has banking offices through three subsidiaries in southern Mississippi, Alabama, and Louisiana, as well as the Florida panhandle.
It has commercial insurance offices in Mississippi and Loui-siana. It is just now bringing licensed insurance reps into its Florida banks, but it has none yet in Alabama.
The next agency deal could come in any key area the bank serves, Mr. Chaney said. Baton Rouge, La., where the bank has a strong presence, is a good example of a city where a purchase would make sense, he said.
But Hancock has no specific revenue goal in mind for the insurance operation, he added. A key goal is to help "lessen [the bank's] dependence on interest income," he said.
The reason, he explained, is that net interest margins have been squeezed at all banks in the past five to 10 years as nonbanks have aggressively offered what were traditionally core bank products.
Hancock Bank wants to avoid using fees, such as those often imposed on checking or savings accounts, to make up the difference, Mr. Chaney said. "That's not the way to grow," he said.
Instead, Hancock aims to generate more revenue from businesses like insurance, brokerage, and trust services, he said.
One factor that encouraged the Eaves deal is the cross-selling success Hancock has enjoyed from the Ross-King-Walker acquisition. In the first quarter of this year, Mr. Chaney said, the bank "wildly exceeded" its pro-forma goal of cross-selling insurance and banking products to 10% of its customer base.
"That transaction went very well, and we wanted to continue to build on it," he said. "We've proven that we can execute the [cross-selling] strategy."
One reason cross-selling has been done so effectively at Hancock is that the bank can offer good deals to longstanding insurance customers, and vice versa, he said. "We have systems in place that allow us to look at the total relationship a customer has with us," Mr. Chaney said.
For example, a business owner who has bought insurance for years from Eaves and now needs a large loan to expand could well get a more favorable rate on the loan because of the existing relationship, he said.
Banks and other financial services companies have been snapping up independent insurance agencies for years, but Mr. Chaney insisted that the bank's leadership feels no sense of urgency to move quickly on agency deals.
"We have never been driven by what other acquirers are doing in the market," he said. "We look at our deals one on one and case by case, and we're picky with acquisitions."
Hancock, founded in 1899, has had an agency for almost its entire existence. But it was restricted legally to selling insurance in Hancock County, Miss., until the Gramm-Leach-Bliley Act removed the prohibition on mixing banking and insurance in 1999.
Its insurance revenues were less than half a million dollars before the Ross-King-Walker deal. And the company was ranked 92d nationally last year among banks with insurance brokerage fee income, at $3.8 million. It was 30th among companies in the $1 billion to $10 billion asset range, according to the Fee Income Ratings Report compiled by Michael White Associates in Radnor, Pa.
The banking company's Magna Insurance unit, a credit life insurance business, is separate from the commercial insurance operation.
Mr. Garmhausen, who covered mutual funds for American Banker from 1997 to 1999, is a freelance writer in Brooklyn, N.Y.
