Acquisitions are one way to expand in an underrepresented market. Sometimes it makes sense to sit back and steal talent after someone else buys the bank.
ServisFirst Bancshares opted for the latter approach. The $2.9 billion-asset company just hired a lending team from BancTrust Financial, including the former chief executive, to ramp up in Mobile, Ala.
Trustmark spent more than $100 million on BancTrust, including repayment of funds from the Troubled Asset Relief Program. And ServisFirst called Bibb Lamar to convince BancTrust's former CEO and six other bankers to open a new office.
Recruiting lending teams from rivals has become a popular way to expand into new markets or business lines, says Curtis Carpenter, managing director of Sheshunoff & Co. in Austin, Texas. "Most buyers would prefer a turnkey approach, to buy a bank with a great management team," he says.
"That's just not always available," Carpenter adds. "So many markets have been picked over, and there are not that many banks to acquire."
Instead of seeking acquisitions, many banks have determined that it is more cost-conscious to recruit teams, says Scott Petty, an executive recruiter at Chartwell Partners in Dallas. "It doesn't require regulatory approval and you're not diluting" shareholders, he says.
Trustmark tried to keep Lamar, but "it didn't feel like the perfect fit," he says. "Before I propped my feet up, ServisFirst and I got together."
ServisFirst has about a dozen people working out of its Mobile office. It will probably open one or two more branches in the area, rather than buy another bank, though the business plan "is not heavy in bricks and mortar," Lamar says.
ServisFirst's strategy of limiting the number of retail branches per market is logical, says L.T. "Tom" Hall, CEO of Resurgent Performance in Alpharetta, Ga. "Having one major branch in a market? That makes a lot of sense," says Hall, who has served as a consultant to Regions Financial (RF) and other Alabama banks. Taking an efficient approach can make "your numbers hum."
ServisFirst is the second-biggest bank based in Alabama, after Regions. Mobile is the state's third-biggest market. To gain more prominence in Mobile, ServisFirst has taken space in BancTrust's former headquarters building downtown.
"It's déjà vu," says Lamar, who became BancTrust's CEO in 1989. "We had been in that office space for 15 to 20 years."
The $120 billion-asset Regions dominates Mobile, holding 38% of the market's deposits as of June 30, according to the Federal Deposit Insurance Corp. Lamar says ServisFirst is well-positioned to compete against the regional bank as it plans to offer commercial loans, cash management and treasury services.
Regions is "our biggest competitor, but we've assembled a commercial lending group second-to-none in Mobile," Lamar says.
About 44% of ServisFirst's $2.4 billion loan book involves commercial, financial and agricultural loans. At March 31, nonperforming assets made up about 1.3% of total assets.
Mobile is attractive for lending because of a diversified economy that includes manufacturing, shipbuilding, ports and higher education, Lamar says. The local economy should get a boost from Airbus, the European airplane manufacturer, which is planning a $600 million assembly plant in the area.
Analysts initially panned Trustmark's plans to buy BancTrust, expressing concerns that the seller was saddled with high-cost deposits and weak market positions. BancTrust had also been losing money, which analysts said would drain Trustmark's capital for years.
During a conference call last month to discuss quarterly results, Peyton Green, an analyst at Sterne Agee, cast doubts that all of BancTrust's clients were "going to fit" Trustmark's credit profile.
Trustmark's executives defended the deal, stating during the conference call that they will be able to work through BancTrust's problem assets this year.
Trustmark will have a chance to "sort through things" in BancTrust's portfolio, Gerard Host, Trustmark's president and chief executive, said during the April 24 call. "New growth opportunities" will offset any loan issues.
Host, through a company spokeswoman, and Green declined to comment.