Expect a number of community banks to pursue aggressive growth strategies next year after raising capital during the current stock market surge.
Since the presidential election, at least a dozen publicly traded banks tracked by American Banker have announced plans to sell common stock with an aggregate value of more than $1 billion. Industry observers expect more institutions to follow suit as stock prices, particularly those of financial institutions, continue to appreciate.
Most of the banks have said they will use the capital for organic growth and acquisitions, virtually assuring an escalation in competition for high-quality sellers, loans and personnel.
"Those banks can see opportunities to put that money to work," said Chris Marinac, an analyst at FIG Partners in Atlanta. "You raise money when it's available, not when you need it. There's a lot of success in banking when companies do that."
Iberiabank in Lafayette, La., went to investors last week to raise nearly $300 million in a public offering. The $21 billion-asset company, which took advantage of a 44% spike in its stock price since June 30, recently said that it had hired a veteran banker to kick off an expansion into South Carolina.
Texas Capital Bancshares in Dallas raised nearly $240 million after its stock appreciated 60% from the middle of the year. The $22 billion-asset company in recent weeks has snagged a banker from BBVA Compass and small-business lenders from GE Capital and Bank of America.
The new capital gives the hires at Iberiabank and Texas Capital extra backing to go out and make more loans and compete harder with big banks, Marinac said. It could also translate to higher earnings in the long run if the banks are able to make more variable-rate loans. "That could be the wisest decision right now," Marinac said.
Organic-growth strategies have newfound promise, said Jeff Rulis, an analyst at D.A. Davidson. "We're all starting to chew on the prospects of the Trump administration and whether it will lend itself to a more business-friendly environment."
Of course, capital could strengthen the hand of acquisition-minded banks.
Fentura Financial in Fenton, Mich., which agreed earlier this year to buy Community Bancorp in St. Charles, Mich., recently said it would use some of the proceeds from a planned $15 million stock offering to help pay for that deal. The $501 million-asset Fentura's stock is up 16% since the end of June.
HomeStreet in Seattle plans to sell up to $60 million in stock over time. The $5.3 billion-asset company, which has enjoyed a 51% bounce in its stock price over the last five months, has been busy buying branches from Boston Private Financial Holdings and Bank of Oswego.
"There are guys out there thinking that they can put that capital to work in the M&A market," Rulis said.
And "there are plenty of small banks available if you can find the right pricing harmony," Marinac said.
Recent stock offerings could also help banks shore up capital levels in the event of credit deterioration or increased regulatory oversight of asset concentrations, industry observers said.
Franklin Financial Network in Tennessee, for instance, recently raised about $72 million. The $2.7 billion-asset company said last month that it had been ordered to raise capital as part of a memorandum of understanding with regulators that was tied in part to its heavy exposure to commercial real estate.
"A rising tide lifts all boats," Rulis said. "There may be some banks that are keen to raise capital to be prepared when it comes to credit, particularly those that are seeing some cracks in CRE, energy or other areas where regulators are getting a little anxious."