Kelly King, to borrow from one of his own M&A analogies, has found a fishing hole he really likes.
King, the chairman and chief executive of BB&T in Winston-Salem, N.C., told analysts when he announced plans last year to buy Susquehanna Bancshares in Lititz, Pa., that "you have to fish on the side of the boat where the fish are."
On Monday he reeled in another big catch in Pennsylvania, agreeing to buy the $9.6 billion-asset National Penn Bancshares in Allentown.
BB&T's latest deal makes sense given the $210 billion-asset company's preference to be among the five-biggest banks in any market in which it operates. In less than a year BB&T has agreed to pay roughly $4.3 billion to control about 4.8% of Pennsylvania's deposits, based on data from the Federal Deposit Insurance Corp.
King was asked during a conference call Tuesday about his decision to go big in Pennsylvania, a state known for having slower growth than many other states where BB&T has branches.
Gross domestic product in Pennsylvania rose by 1.8% last year, compared with 5.3% in Texas and 2.7% in Florida, according to the U.S. Bureau of Economic Analysis.
Yet Pennsylvania's median household income in 2013 topped the U.S. average, and was very close to that of Texas, based on Census Bureau data. King pointed to those high-net-worth pockets, which he said are perfect for promoting insurance products and wealth management services, in explaining the rationale behind his bank's M&A strategy.
"There's a little bit of a trade-off of growth" for higher incomes, King said.
"A lot of people get enamored with fast-growing markets," he added. "They're really exciting until they're not growing really fast anymore and they start tanking in the middle of a big correction. We like a lot of the comfort of the slower-growth markets. They don't boom in the boom times, but they don't bust in the bad times."
King, during an interview after the conference call, reiterated that "scale and density still matter a lot" in banking, adding that BB&T continues to prefer in-market deals rather than entering entirely new markets.
That being said, do not expect BB&T to go fishing in Pennsylvania again anytime soon. King estimated during the conference call that he would likely hold off on making any more bank deals for six to 12 months. He advised one analyst to "not be sitting around waiting for us to do another acquisition in Pennsylvania anytime soon."
"Six months isn't that long," Marty Mosby, an analyst at Vining Sparks and a former executive at First Horizon National, said in an interview.
"We're now certain that BB&T is a serial acquirer again," Mosby added. "They're on the treadmill and, while they may take a pause, they're not getting off. The question is whether they will be able to be a serial acquirer and create shareholder value. The window is still open to do that, but who knows how long it will stay open."
A lot of factors played into BB&T's decision to tap the brakes on M&A. "Part of it involves intuition from being in this business a long time," King said in the interview.
The size and complexity of the deals contributed to the decision to pause, along with the demands that each deal will place on functions such as treasury management and human resources.
"If you get feedback [from inside the company] and begin to feel the pressure a bit you take a pause," King said, though he said there was "no substantial" pressure to pause.
An extended break will also help BB&T get its feet set in Pennsylvania, where retaining Susquehanna and National Penn employees will be critical to the company's long-term success. For instance, BB&T wants to boost National Penn's fee income from 26% of total revenue now to roughly 35% in the next few years.
"Expect us to accelerate revenue immediately," King said during the call. "You've got people on the ground and we just need to give them more arrows in the quiver."
King elaborated on the importance of personnel during the interview. "You can do a perfect execution with securities management and systems conversion, but if you don't do a good job with human resources integration and keeping morale high you're not going to be successful when you start calling on people," he said.
Banks of all sizes, ranging from PNC Financial Services Group to scores of community banks in the state, are eager to take advantage should King and his team fumble the integrations of Susquehanna and National Penn.
"You're losing two substantial regional banks" in Pennsylvania, Mosby said, adding that it is natural to think that BB&T will have to play some defense in coming months.
"For us this seems too good to be true," said Jeane Coyle, president and chief executive of Penn Community Bank in Buckingham Township, Pa. The $1.8 billion-asset Penn Community is the fourth-largest bank in Bucks County, where BB&T is set to have 11 branches and nearly $400 million in deposits.
"National Penn was the largest bank in the region attempting to convey a community bank feel," Coyle said. "Mergers feed community banks. I could go through a list of the business we've gotten from big banks, and here we are again. There's one less 'Penn' in the market and we plan to capitalize on the situation."
John Reosti contributed to this report.