Hold 'Em

REVIEW SUMMARY
Business. Community Bancorp LLC, Houston
Industry. Banking
Key. Firm entered the Florida banking market with two acquisitions in the past six months.

Hank Holmes, who built a two-decade banking career in Texas with a specialty in cleaning up messy loan portfolios, recently delivered some sunshine — and a lot of money — to Florida.

Specifically, Holmes is the leader of a management team tasked with rebuilding Tampa-based Superior Bank, which has 10 Gulf Coast offices and $539 million in assets. Superior's Gulf Coast holdings include the former People's Community Bank in Sarasota and Bradenton, which Superior bought in 2007 for $77 million, or 3.2 times book value. It was one of the highest premiums paid for a Sarasota-Bradenton community bank during the past decade.

But on April 15 federal regulators shuttered Superior's Birmingham, Ala.-based parent company, Superior Bancorp. Office of Thrift Supervision officials cited Superior's critically undercapitalized portfolio in its decision. Indeed, at $232.19 million, the Florida division of Superior posted the largest loss of any Gulf Coast community bank in 2010.

Enter Holmes. A Memphis, Tenn. native, Holmes is an executive with Houston-based Community Bancorp LLC. Community is a bank holding company and private equity firm formed by a group of Texas banking stars in 2010 for one purpose: to buy failed or troubled banks in the Southeast with $1 billion in capital it raised mostly from public and private pension funds, foundations and endowments.

Community, through a new subsidiary it created, Superior Bank NA, assumed nearly all $3 billion of Superior's assets and its $2.7 billion in deposits. The deal includes a loss-share agreement with the Federal Deposit Insurance Corp. on $1.84 billion in Superior assets, which protects Community against certain potential loan losses in the portfolio.

In total, Community took control of 73 Superior branches in Alabama and Florida; six mortgage offices in Alabama, Florida and Tennessee; and 24 consumer finance offices.

While the loss-share agreement certainly favors Community, the firm hasn't absorbed Superior on the cheap. Instead, Holmes says Community injected $370 million into Superior for projects that include loan workouts, technology upgrades and fraud protection for branches in Florida and Alabama.

“We've come in and provided capital,” Holmes says. “Now we need to go back on offense.”

To get there, Holmes says his first priority is to restore the Superior employee base in Florida, which totals 200 people. “They've had a few years of tough times,” says Holmes, president and CEO of the Florida Region for Superior Bank NA. “That caused most employees to be down on their heels.”

Community executives, of course, also must restore Superior's book of business. “We like Florida,” says the Houston-based Holmes, who has spent about two weeks a month in Tampa since the Superior acquisition. “We think Florida at some point will pick up steam.”

The focus of Superior in Florida, Holmes says, will be a lot less commercial real estate loans and a lot more commercial and industrial loans. The bank will target businesses with a range of $10 million to $150 million in annual revenues and earnings before interest, taxes, depreciation and amortization (EBITDA) of $5 million to $50 million.

Business aplenty
That focus puts Holmes' version of Superior Bank in a crowded market.

In Tampa-St. Petersburg, for instance, several locally run community banks target a similar client. There's Largo-based USAmeriBank, which recently surpassed $1 billion in assets, for one. There's also American Momentum Bank and Bay Cities Bank. Both of those Tampa-based institutions have more than $600 million in assets, according to FDIC data.

Those three banks have the capacity to compete directly with Superior. Plus, Holmes acknowledges, there are several regional banks that will tightly guard their clients against Superior. That list includes SunTrust, Regions and BB&T.

Finally, the merger of Hancock Bank with Whitney Bank, a deal that became official June 5, represents another formidable foe. Gulfport, Miss.-based Hancock bought New Orleans-based Whitney in a $1.5 billion acquisition last year.

The combined Hancock-Whitney entity on the Gulf Coast will have 18 branches from Pasco County to south Sarasota County. In total, the bank will have $20 billion in assets through 305 branches in Alabama, Florida, Louisiana, Mississippi and Texas.

Hancock-Whitney Tampa and Central Florida President Eric Obeck says the bank won't be passive in using its newfound resources. “We are very well positioned from a competitive standpoint,” says Obeck. “We are incredibly well capitalized.”

Holmes, though, likes Superior's chances. “There's plenty of business to go around,” he says.

One way Holmes believes Superior will capture that business is through its embrace of technology. For example, the bank hopes to provide services through iPads and iPhones someday soon. Holmes also says the bank has been an industry leader in Positive Pay, a new technology-based automated fraud detection service.

Besides, Community Bancorp executives knew the market was crowded before it assumed Superior's assets in April. Community even considered Superior for a potential acquisition while it was still open and under regulatory scrutiny. Community put Superior near the top of its most-coveted list, says Holmes.

Move fast
Entering Florida with an ambitious mission to grab market share isn't new for Community. The bank holding firm's first acquisition was announced in November, when it bought Starkville, Miss.-based Cadence Bank, which has offices in five states, including Florida. That deal, a $30 million buyout of Cadence shares, closed in March.

Cadence had three offices on the Gulf Coast when Community bought it, two in Sarasota and one in east Manatee County. Cadence itself entered the Gulf Coast in 2006, when it bought Sarasota-based SunCoast Bancorp.

Both Superior and Cadence retained their names under Community, although Holmes says that decision is under review. All of the banks could ultimately fall under one brand name.

Community's buyout of Cadence highlights another side of the Houston firm that now runs Superior: its moxie.

That's because Community actually came late to the Cadence deal, a few weeks behind Jackson, Miss.-based Trustmark National Bank. Trustmark, in fact, already reached a deal to buy Cadence for $23.6 million last September, when Community made its $30 million offer that upped the payout by more than 25%.

Community CEO Paul Murphy says the deal was a good place to start for the firm, which moved fast to buy Cadence.

“The need for additional long-term capital in the U.S. banking system and the unique market timing enabled us to quickly bring together a talented team of directors, managers and investors,” Murphy says in a statement. “(They) understand the role of community banks in building a strong economy.”

Murphy leads a distinguished group of executives at Community Bancorp. Murphy co-founded Texas-based Amegy Bank in 1990, which grew from less than $100 million in assets to $11 billion in 15 years. Several former Amegy executives followed Murphy to Community.

Community's board of directors is also notable. Its chairman is William Harrison Jr., a former chairman and CEO of JPMorgan Chase. Other members include Robert Steel, a former U.S. Treasury official and onetime president and CEO of Wachovia; J. Richard Fredericks, former U.S. Ambassador for both Switzerland and Liechtenstein; and Scott Stuart, a prominent Wall Street investor and co-founder of a private equity firm.

Holmes, who worked under Murphy at Amegy, plans to lean on that star power in his effort to restore Superior. Another helpful experience is the three years Holmes spent in charge of Amegy's special assets department, where he led a group of bankers assigned to work through underperforming loans.

Holmes called the work stressful but intellectually stimulating. He also says the experience is now a daily reminder of how much a bad loan decision can impact a bank. He will punctuate that point at Superior.

“Every banker that loans money should spend time in a special assets department,” says Holmes. “If you work through the issues it will show you why things are right or what's wrong.”