Pinnacle to become small fish in the Carolinas with latest acquisition

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North Carolina is set to lose another fast-growing bank.

BNC Bancorp in High Point, N.C., agreed Sunday to sell itself to Pinnacle Financial Partners in Nashville, Tenn., for $1.9 billion, dealing a blow to those who might have hoped that North Carolina was on the verge of producing a new generation of regional banks.

The sale also removes one of the state’s most active acquirers just months after another consolidation-minded institution — Yadkin Financial in Raleigh, N.C. — agreed to sell to an out-of-state institution.

Pinnacle, meanwhile, could face challenges as it evolves into a regional bank.

The $11 billion-asset company has benefited from having relative heft in Tennessee, a fragmented banking market where the five biggest banks only hold about half of the state’s deposits, based on June 30 data from the Federal Deposit Insurance Corp. In comparison, North Carolina’s top five banks control more than 80% of the state’s deposits.

Pinnacle’s management, for its part, seemed assured in its ability to make a name for itself in the Carolinas.

“We’re confident in the service model that we have been able to build to attract people,” Terry Turner, Pinnacle’s president and CEO, said in an interview. “It lacks bureaucracy where lenders can be quick to market with responses. That’s something clients want everywhere.”

In many ways, those comments echo those of Vincent Delie Jr., president and CEO of F.N.B. Corp. in Pittsburgh, which is in the final stages of buying the $7.3 billion-asset Yadkin. In recent remarks at an event in North Carolina, Delie touted his company’s willingness to let local lenders approve loans of up to $10 million.

At the same time, North Carolina should provide Pinnacle with new opportunities. Delie, for instance, recently touted the state’s growing population and access to about 190,000 new commercial lending prospects.

Such growth leaves room for a bank of Pinnacle’s size to come in and offer businesses a new alternative, said Peyton Green, an analyst at Piper Jaffray.

Turner, for his part, said he believes Pinnacle can build on the momentum that the $7.4 billion-asset BNC has generated in recent years. He noted that his company already competes against many of the biggest banks in North Carolina such as Bank of America and SunTrust.

Still, the pending sales of BNC and Yadkin also promise to shake up banking in the Carolinas, creating opportunities for other area banks to recruit lenders and target borrowers, industry experts said.

"Even if Pinnacle does an incredible job on the integration … it probably creates opportunity for community bank players to grab share," Green said. "Any merger creates disruption. The whole banking business is moving to higher scale."

“Pinnacle has wanted to take business from the larger guy — and they are now much larger,” said Brian Martin, an analyst at FIG Partners. “Some smaller guy out there may be thinking they will take the crumbs from Pinnacle or the Yadkin-F.N.B. deal."

Pinnacle said it will keep Rick Callicutt II, BNC’s president and CEO, who will oversee operations in the Carolinas and Virginia. Callicutt, who had been focusing an increasing amount of time on building BNC’s scale across three states, said he is relishing the notion of getting closer to “the action” by recruiting lenders and clients after the deal is completed.

Turner and his team also have previous experience operating a bank that served multiple markets. They once worked First American, a regional that was bought by AmSouth Bancorp. more than a decade ago.

“Terry understands that it’s a team,” Martin said. “He’ll keep [the BNC management team] in place and let them run it.”

Turner also disclosed in a letter to employees that his role at Pinnacle will "shift somewhat," informing them that he will be "somewhat less involved in managing day-to-day activities in each market." Rob McCabe, Pinnacle's chairman, will lead the company's Tennessee market.

Turner’s focus going forward will be on maintaining Pinnacle’s culture, where lending decisions are made quickly and locally. So far, Pinnacle has shown an ability to export its model to new markets, through organic growth and acquisitions, since it was founded in 2000, he said.

“The company is well prepared for me to concentrate on the broader strategic issues like cultural development,” Turner said. “I don’t have to be involved in every hire that is made.”

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