3 state banks ma­neu­ver­ing ac­qui­si­tions

2 work­ing through big buys; LR in­sti­tu­tion’s deal done

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - DAVID SMITH

Arkansas’ three largest pub­licly traded banks are in dif­fer­ent places when it comes to buy­ing other banks.

Sim­mons First Na­tional Corp. in Pine Bluff is clos­ing on its two largest ac­qui­si­tions. Con­way-based Home Banc­Shares is near­ing the close of its largest ac­qui­si­tion. And Bank of the Ozarks of Lit­tle Rock com­pleted its two largest bank pur­chases last year.

In March, Home Banc­Shares an­nounced the pur­chase of Stonegate Bank in Pom­pano Beach, Fla., which has $3.5 bil­lion in as­sets. It is the big­gest bank Home Banc­Shares has bought.

Matt Ol­ney, a bank­ing an­a­lyst in Lit­tle Rock with Stephens Inc., ex­pects the Stonegate deal to close early next year. Home Banc­Shares will have about $13.5 bil­lion in as­sets when the deal closes.

“Home Banc­Shares re­mains ac­quis­i­tive and is now tar­get­ing banks in the size range of $1 bil­lion to $2 bil­lion in as­sets,” Ol­ney said in a re­cent re­search brief.

Dur­ing the sec­ond quar­ter, Home Banc­Shares signed four nondis­clo­sure agree­ments with banks and com­pleted re­search on one of those banks, Ol­ney said.

The Con­way bank has its sights on a cou­ple of deals that may come to­gether sooner rather than later, said John Al­li­son, chair­man of the bank. Home Banc­Shares owns Cen­ten­nial Bank of­fices in five states.

“We re­main ex­tremely dis­ci­plined on our [ac­qui­si­tion] strat­egy, no di­lu­tion to share­hold­ers,” Al­li­son said in a re­cent con­fer­ence call. “We take what the world gives us. The way to get in trou­ble is to push loans. The key is to re­main dis­ci­plined, work on your loan prob­lems, raise de­posits and try to be more ef­fi­cient.”

Ol­ney’s price tar­get for the Con­way bank is $29 a share, down from $31. Home Banc­Shares closed at $25.30 Thurs­day, up 11 cents, in trad­ing on the Nas­daq ex­change.

In De­cem­ber, Sim­mons an­nounced the pur­chase of pub­licly traded South­west Ban­corp, a Still­wa­ter, Okla., bank and its sub­sidiary, Bank SNB, with $2.5 bil­lion in as­sets. In Jan­uary, Sim­mons said it had agreed to buy First Texas, the hold­ing com­pany for Fort Worth’s South­west Bank with $2 bil­lion in as­sets.

The Dal­las-Fort Worth econ­omy is per­form­ing ex­tremely well, said Ge­orge Makris, Sim­mons’ chair­man and chief ex­ec­u­tive of­fi­cer.

“And the econ­omy is di­ver­si­fied there,” Makris said. “There’s not a lot of con­cen­tra­tion in one in­dus­try seg­ment. South­west Bank, be­cause of its rep­u­ta­tion, has been able to take ad­van­tage of that. I will tell you this: When we talk about the un­der­writ­ing at South­west Bank, al­most all of the loans that we par­tic­i­pated in this last quar­ter were loans that were al­ready on their books, that we had a chance to look at dur­ing our due dili­gence phase.”

Be­cause of that, Sim­mons is com­fort­able with South­west Bank and Bank SNB’s un­der­writ­ing stan­dards, Makris said.

Sim­mons has had reg­u­la­tory ex­am­in­ers at its head­quar­ters since Jan­uary, Makris said.

“If we felt there were any reg­u­la­tory is­sues that would pre­vent the ap­proval of the ap­pli­ca­tion, we wouldn’t have filed one,” Makris said.

Af­ter Sim­mons re­leased its sec­ond-quar­ter earn­ings, Ol­ney raised his rat­ing on it from hold to buy.

“Sim­mons sec­ond quar­ter re­sults were high­lighted by solid loan growth, good ex­pense man­age­ment and steady net in­ter­est mar­gin,” Ol­ney said in a re­search

brief. Ol­ney also has buy rat­ing on Home Banc­Shares. He low­ered his rat­ing to a hold on Bank of the Ozarks on Fri­day af­ter the res­ig­na­tion of Vice-Chair­man Dan Thomas.

When Sim­mons com­pletes the two pend­ing pur­chases, it will have about $13.5 bil­lion in as­sets.

Ol­ney projects that Sim­mons will close the two pend­ing ac­qui­si­tions some time af­ter Jan. 1, al­low­ing Sim­mons to re­main be­low a $10 bil­lion reg­u­la­tory as­set thresh­old and de­lay­ing as­so­ci­ated costs for an­other year.

Ol­ney raised his tar­get price to $64 a share from $60. Sim­mons shares closed at $54.40 Thurs­day, up 55 cents, in trad­ing on the Nas­daq ex­change.

Bank of the Ozarks com­pleted its two largest deals last year — Com­mu­nity & South­ern Hold­ings of At­lanta, with $3.9 bil­lion in as­sets, and C1 Bank of St. Peters­burg, Fla., which had $1.7 bil­lion in as­sets.

Bank of the Ozarks is still look­ing to grow through ac­qui­si­tion, Ge­orge Glea­son, chair­man and chief ex­ec­u­tive of­fi­cer, said in a re­cent con­fer­ence call. But Bank of

the Ozarks’ stock hasn’t been trad­ing as strongly as it did a year or two ago, he said.

“So that has made the math of trans­ac­tions less ap­peal­ing and more chal­leng­ing,” Glea­son said.

Ac­qui­si­tions still will be an im­por­tant part of the bank’s growth strat­egy, Glea­son said.

“But we will be dis­ci­plined about it,” Glea­son said.

Bank of the Ozarks, which has more than $20 bil­lion in as­sets, con­tin­ues its na­tion­wide com­mer­cial real es­tate lend­ing in its real es­tate spe­cial­ties group, which ac­counts for about 70 per­cent of the bank’s loans.

Re­cent pub­lished re­ports have high­lighted a $90 mil­lion loan from the bank to the New York de­vel­oper of a 16-story build­ing on Park Av­enue; a $58 mil­lion loan for Wyn­wood 25, a 289-unit apart­ment com­plex in Mi­ami; a $29 mil­lion loan for nine res­i­den­tial con­do­mini­ums in an 11-story build­ing in New York; and a $27 mil­lion loan for the con­struc­tion of an eight-story, 168-unit ho­tel in down­town Minneapolis.

On March 31, Bank of the Ozarks had $2.6 bil­lion in real es­tate loans in New York, $2.1 bil­lion in Florida, $1.4 bil­lion in Ge­or­gia, $1.3 bil­lion in Texas and $1.2 bil­lion in Arkansas.

In 25 other U.S. and in­ter­na­tional mar­kets — in­clud­ing the Ba­hamas and Cay­man Is­lands — Bank of the Ozarks had an­other al­most $3.7 bil­lion in real es­tate loans.

Al­to­gether, the Lit­tle Rock bank had $12.3 bil­lion in real es­tate loans.

Af­ter the bank’s sec­ondquar­ter re­port, Ol­ney main­tained his buy rat­ing on Bank of the Ozarks but low­ered his price tar­get for the bank from $64 to $58. Bank of the Ozarks shares closed at $47.57 Thurs­day, up 28 cents, in trad­ing on the Nas­daq ex­change.

Bank of the Ozarks re­cently cel­e­brated its 20th year as a pub­lic com­pany. It has grown from 13 of­fices and $309 mil­lion in to­tal as­sets in 1997 to 251 of­fices and more than $20 bil­lion, Glea­son said.

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