Number of Big Deals Grows in 2010

by Jan Cottingham  on Monday, Jan. 24, 2011 12:00 am  

Several factors account for the rebound, McKissack said.

The financing market "was vastly improved over 2008 and 2009, so lenders were back in the game."

In addition, inactivity in 2008 and 2009 created pent-up deal demand that found an outlet in 2010. Buyers sitting on piles of cash felt the need to put that money to work to create growth.

"And the underlying fundamentals of the marketplace - generally and then specifically to business - there was some stability so buyers and sellers could come together," he said.

Banks Go Deal Hunting
Last year, Home BancShares Inc. of Conway, parent company of Centennial Bank of Conway, announced the acquisition of six distressed banks, all in Florida, one of the states hardest hit by the housing bust. That made it the top buyer of failed banks in the U.S. last year.

(On Thursday, Home BancShares Inc. reported a fourth-quarter loss of $13.8 million, dragging its profit for 2010 down to $17.6 million. The loss is the result of a loss of $26.5 million on extraordinary items, including big write-offs for problem loans in Florida and two specific business relationships in Arkansas: Gene Cauley and Kevin Lewis. But the loss would have been much greater without $25.2 million in pre-tax gains from two FDIC-assisted acquisitions in the fourth quarter.)

Bank of the Ozarks of Little Rock bought four banks in FDIC-assisted deals in 2010, and it's already been busy in 2011. On Jan. 14, it announced that it had expanded its purchases with an FDIC-assisted deal for Oglethorpe Bank of Brunswick, Ga.

Asked how many more of such purchases might occur, Randy Dennis, president of DD&F Consulting Group of Little Rock, said, laughing, "That's like asking how long a piece of string is." DD&F provides bank consulting services to the financial services industry.

"I think you're going to find Centennial, Bank of the Ozarks, Simmons and Arvest are all still looking at deals like this," Dennis said. "There's a lot of potential bank failures in Florida, in which Centennial has an interest. There are a lot of potential bank failures in Georgia, South Carolina and North Carolina, where Bank of the Ozarks has an interest. And there's probably going to still be failures in Missouri and Kansas, where Simmons and Arvest have an interest. So to the extent that there are failures out there, then I think all of our buyers are going to continue to look."

Dennis called the buying binge "a once-in-a-lifetime opportunity for banks to acquire the institutions and actually have the FDIC pay them to do it."

The banks "are assuming deposits and purchasing assets, and the FDIC, in almost all except the Southern deal, is providing loss-share on the assets," he said, referring to the acquisition of First Southern Bank of Batesville by a Missouri institution, Southern Bank of Poplar Bluff. Under loss sharing, the FDIC covers part of the loss on a pool of assets. "It's a great deal," Dennis said.

"I'm proud of our Arkansas banks because I think our bankers have been more attuned to this [acquisition opportunity] than any other state."



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