A recent change in Tennessee law that reduces the waiting period for start-up banks to sell themselves could open up acquisition opportunities for out-of-state banks looking to bulk up in the Memphis and Nashville markets.
Under a law passed in March, a bank in Tennessee is fair game to potential acquirers as soon as it hits its third anniversary. The waiting period had been five years.
Because 1999 and 2000 were Tennessee's busiest start-up years in more than a generation, 16 three- and four-year-old banking companies could now be in play. The stock of one of them, Pinnacle Financial Partners Inc. in Nashville, has risen 18% since the law was changed, to $15.75 late Monday.
Timothy Amos, the general counsel for the Tennessee Bankers Association, said it began lobbying for the change after banking lawyers complained that the five-year barrier made it hard to do deals with out-of-state banks.
Shortening the wait continues the trend toward lower interstate banking barriers, Mr. Amos said, "and it might prompt some of our neighbors to give another look at Tennessee banks."
Tennessee is the second southern state to have recently reduced the waiting period from five years to three; Georgia passed a similar law last year. Four other states that border Tennessee have five-year waiting periods; three - Virginia, Kentucky, and North Carolina - impose no wait at all.
Perhaps because of its place on the map, Tennessee, which is bordered by eight states, has attracted a lot of interest from out-of-state banks. (Missouri is the only other state bordered by as many states.)
Just last week, at the Gulf South Bank Conference in New Orleans, executives from three banking companies in Georgia and Mississippi said they were eyeing acquisitions in the Nashville and Memphis markets, where most of the start-up activity occurred.
- James Yancey, the president of Synovus Financial Corp. in Columbus, Ga., said the $18 billion-asset multibank holding is targeting Nashville-area banks with $400 million to $800 million of assets.
- NBC Capital Corp. of Starkville, Miss., with $1.1 billion of assets, has its eyes on Memphis-area banks with $100 million to $300 million.
- Aubrey Patterson, the chief executive officer at the $10.1 billion-asset BancorpSouth Inc. of Tupelo, Miss., said it aims to grow in Nashville and is always looking for buyout targets with about $200 million to $300 million of assets in Tennessee and the rest of its markets.
Mr. Patterson also said during his presentation that BancorpSouth aims to increase its wealth management business in greater Nashville. That may signal an interest in Pinnacle, which is profitable, about the right size ($348 million), and has a wealth management niche.But Mr. Patterson said BancorpSouth has no Tennessee deals lined up, and he noted that opportunities to buy banks meeting the company's criteria are limited.
Pinnacle was founded in October 2000 by former executives of First American Corp. of Nashville, which AmSouth Bancorp of Birmingham, Ala., had bought a year earlier.
Terry Turner, Pinnacle's president and chief executive officer, said he suspects that the law making start-ups saleable earlier has made its stock more attractive to investors. However, sale is not in Pinnacle's plans, he said.
Obviously the new law "does create an environment when people speculate you are takeover candidate," Mr. Turner said, "but we are busy building a big bank in Nashville on our own."
