Mass Mergers

Mass Mergers

Banking by Mark Gordon | Managing Editor

Community banks continue to capitalize on missteps made by banks going through regional and national consolidations. A good marketing strategy, backed up by being the anti-big bank, helps.

The banking industry has been going through another merger blitz the past year. Names of regional and national banks, and who owns whom, tend to blend together in confusion.

And community banks are there to sweep up the frustrated customers.

Mass mergers have translated into mass money for several smaller, community Gulf Coast banks. From Sarasota to Naples, several banks report increases in deposits, loan activity and customer traffic over the last year, some of which they attribute to customer confusion and dissatisfaction caused by bank mergers.

In one sense, community and small town banks reaping the benefits of their brethren's merging missteps is nothing new; that's one of the reasons people start a community bank in the first place, the whole 'we can do it better by keeping it local' mantra. Still, for some Gulf Coast banks, mergers and consolidations and the ensuing fallout has meant the difference between breaking even and breaking away.

"These mergers have been great for us," says Tom Quale, president and CEO of Sarasota-based Landmark Bank. "That is where a lot of our new business comes from."

Landmark Bank is one several community banks that launched in Sarasota in 1999 and 2000. It had $280 million in assets the first half of 2006, a 28% jump from the $219 million it had in the first six months of 2005. Deposits have increased 24% over that time, from $197 million to $245 million.

Quale says about 50% of Landmark's customers, both business and personal accounts, left their last bank because of a merger. And while it's hard for Quale or any other bank president to say exactly how many new customers are directly linked to another bank's merger, many bankers report anecdotal evidence of hearing new customers complain about their old banks that went through a merger. Comments include being forced to go through phone tress to reach someone and waiting for executives in Atlanta, Charlotte or Birmingham to make decisions.

Mergers over the last two years that have impacted the Gulf Coast include Fifth Third Bank buying First National Bank of Florida, a maligned deal that has caused grief for both customers and bank employees over the last 18 months; Regions Financial Corp. buying AmSouth, though AmSouth has a much bigger presence on the Gulf Coast; M & I Corp. buying Gold Bank; Whitney Bank buying Bradenton-based First National Bank, parent of 1st National Bank & Trust, one of the biggest community banks in Manatee County; and Cadence Bank buying SunCoast Bank, a way for Cadence's Starkville, Miss-based parent company, NBC Capital Corp., to get into Florida.

John Moran, president and CEO of Riverside Bank of the Gulf Coast, says this is the second time a flurry of mergers has translated into increased market share for his bank, which has branches in Lee, Collier, Manatee and Sarasota counties, including two inside Wal-Marts. The first time was in the late 1990s and early 2000s, when Barnett Bank, Bank of America and Nations Bank played a game of merging musical chairs.

At that point, Riverside was only a few years old and Moran credits those mergers with a big role in driving the bank's early growth. In the last month, capping off another successful growth period, Moran has seen another increase in deposits and potential clients. "Anytime there's a merger," Moran says, "the customer says the signs are being changed, so I'm going to vote for me."

Like Moran, Geoffrey Roepstorff of Fort Myers-based Edison National Bank says the Barnett merger period was good for his bank, too. Edison National opened the same day a major Barnett deal was announced in 1997, giving the then-fledgling bank a much-needed jolt, Roepstorff says.

New signs

Bankers say it takes more than simple mergers to grab dissatisfied and underserved customers. Like any other industry, it takes a combination of the right advertising and marketing, having the right message at the right time and a little bit of location luck.

The right location worked for Bradenton-based First Priority Bank over the past year. One First Priority branch is on Cortez Road in Bradenton near a former Gold Bank office, while another branch is in downtown Bradenton, near a 1st National office that was recently converted to a Whitney Bank. "You could almost time the phone calls to when the old signs go down and the new signs go up," First Priority president George Najmy says.

First Priority has had a major growth spurt over the last year. Assets doubled from June 2005 to June 2006, from $100 million to $200 million. Loans and deposits have doubled over that time as well and the bank opened two new locations in 2006, bringing its total number of branches to four. "A lot of that," Najmy says, "has to do with mergers."

Mark Morris, president and CEO of Fort Myers-based Commerce Bank of Southwest Florida, has learned during his years in the community banking industry that banks need to have both the marketing to reach dissatisfied customers and the service to back it up. Morris says he worked for a community bank once that used the slogan "If they changed their bank, so can you."

That got customers in the door and the anti-big-bank approach kept them. Morris, whose Commerce Bank turned one-year-old last week with $45 million in assets, says there are many opportunities to reach potential customers who grow weary of big banks and mergers, as 85% of Florida deposits are from banks headquartered outside of Florida.

Finally, another bonus for community banks when it comes to mergers is employees. Some managers and other top-level talented personnel are forced out when one bank mergers with another, while others choose to leave. Either way, community banks get their choice of employees that can bring customers and banking expertise with them.

Quale says about 50% of Landmark's employees have come from mergers. And Morris has found some of those employees share similar complaints as customers, including having difficulty reaching a supervisor that can make a decision and feeling like a number, not a person.

Recent mergers that impacted Gulf Coast banks

Buyer

Target

Announced Date

Deal Value

($millions)

Price/

Book

Price/

Tangible Book Price/

Earnings

(12 mos.)

Regions

Financial Corp. AmSouth

Bancorp.

5/24/2006

10,060.2

272.28

296.42

13.72

Fifth Third Bancorp First National Bankshares of Florida Inc.

8/2/2004

1,530.1

263.06

NA

42.12

Marshall & Ilsley Corp. Gold Banc

Corp. Inc.

11/09/05

714.6

260.19

297.42

15.54

Whitney

Holding Corp. First National Bancshares Inc. 7/27/2005 120.0 417.08 436.26 34.63

Bancshares of Florida Inc. Old Florida Bankshares Inc. 08/28/06 83.3 295.82 320.98 28.36

Mercantile

Bancorp Inc. Royal Palm Bancorp Inc. 05/30/06 42.2 245.08 245.10 50.63

NBC Capital Corp. SunCoast

Bancorp Inc. 03/16/06 35.1 259.69 259.81 47.66

Republic

Bancorp Inc. GulfStream Community Bank 06/12/06 18.1 201.98 201.98 44.90

Source: SNL Financial LC

Time for a merger in Tampa Bay?

With all the Gulf Coast mergers recently, there hasn't been a large acquisition of a Tampa Bay bank within the past year. But that is sure to change as megabanks gobble up community banks in Florida.

"I think you're going to continue to see mergers and acquisitions," says Kenneth Cherven, chairman/CEO of St. Petersburg-based First Community Bank of America, which has about $239 million in assets and four branches. "There's a lot of pressure to sell because of the high premiums."

There were several large acquisitions in 2004 in the Tampa Bay region, including St. Petersburg-based Republic Bancshare Inc.'s sale to Winston Salem, N.C.-based BB&T and Charlotte, N.C.-based Wachovia's acquisition of SouthTrust Corp.

Last year, United Bank, United Bank of the Gulf Coast and Peoples Bank joined forces to become Synovus Bank of Tampa Bay.

David Feaster, CEO/president of St. Petersburg-based Signature Bank, which has $164 million in assets, says business at his bank hasn't been dramatically affected by mergers or acquisitions since 2004.

Bank of Tampa CEO A. Gerald Divers echoed the same sentiment. But his bank, the largest Tampa Bay area private bank with more than $706 million in assets, has plenty of suitors.

All three bankers say the mergers aren't over. And as the banking industry continues to consolidate, opportunities for local banks will abound.

- Janet Leiser