Centennial, Bank of Ozarks See Gold in Southeastern Expansion

Southeastern moves have taken two of the largest banks in Arkansas to new heights and opened new doors of opportunity. Largely fueled by FDIC-assisted transactions, Conway’s Centennial Bank and Little Rock’s Bank of the Ozarks have carved out sizable expansions in Florida and Georgia while creating beachheads in other parts of the region.

In the space of two years, Centennial Bank went from operating a geographically isolated banking network in the Florida Keys to a growing financial concern in the realm of sun, sand and surf.

Thanks to six FDIC-assisted transactions, the lender went from operating the fourth-largest banking franchise in the Keys to building the 36th-largest banking franchise in Florida.

(And on Friday, after this cover story had gone to press, Centennial announced another FDIC-assisted bank buy, picking up three Tampa-area branches of Heritage Bank.)

Centennial’s 44 full-service locations today service total deposits of $1.2 billion, dwarfing the position it held in Florida at the start of 2010: No. 147 with $241 million in total deposits. The string of Centennial ac-quisitions stretches from the Sunshine State’s archipelago northward through Mickey Mouse’s Magic Kingdom to the Gulf Coast’s Red-neck Riviera.

“There was a method to our madness and why we’re doing what we’re doing,” said Johnny Allison, chairman and founder of Centennial’s parent company, Home BancShares Inc.

The Florida operations now rival the company’s foundational operations in Arkansas: 46 full-service branches with more than $1.7 billion in total assets. The day is coming soon when Centennial’s largest market will no longer be its home state.

Allison is big on Florida. He wants his company positioned to ride a profitable upswing as the state rebounds from the economic downturn and its money-making luster is restored.

His interest in the Gulf Coast area spilled over into southern Alabama with a conventional purchase of Vision Bank branches and assets from Park National Corp. of Newark, Ohio.

Included in the deal that closed in February was a seven-branch network in Baldwin County, Ala., located between Mobile, Ala., and Pensacola, Fla.

Overnight, Centennial became the fifth-largest banking franchise in Baldwin County, with $310 million in deposits and a 9.7 percent stake in the market.

The Vision Bank deal also ex-panded its FDIC-assisted entry into Panama City’s Bay County.

Centennial Bank now holds an 8.5 percent share of this Florida market, and its seven branches service the deposits of $209 million.

That represents the fourth-largest banking franchise in the market.

(Click here for Johnny Allison's thoughts on Centennial’s seven Florida deals completed to date and an eighth in the works.)

Georgia on His Mind

The move into the Southeast by Bank of the Ozarks was powered by seven FDIC-assisted transactions.

Six of those deals demonstrate that George Gleason, the bank’s CEO and founder, has Georgia on his mind.

Bank of the Ozarks now operates the 29th ­largest banking franchise in Georgia, thanks to bank-failed bargains.

During a 13-month window, the bank amassed $700 million deposits in Georgia and assembled a network of 24 full-service branches.

In the process, the company gained sizable market shares in five Georgia counties. The list includes:

  • Dawson County, an hour northeast of Atlanta, where Bank of the Ozarks holds a deposit market share of 10.3 percent ($45.4 million).
  • Lowndes County, on the Florida border and home to Valdosta, where the bank holds a deposit market share of 6.2 percent ($107.5 million).
  • Bartow County, an hour northwest of Atlanta, where the company holds a deposit market share of 5.7 percent ($66.6 million).
  • Coweta County, less than an hour southwest of Atlanta, where Bank of the Ozarks holds a deposit market share of 5.7 percent ($72.5 million).
  • Glynn County, an hour south of Savannah on the Atlantic coast, where the bank holds a deposit market share of 4.4 percent ($77.4 million).

Three of these markets, combined with others gained through FDIC-as-sisted deals, help form a ring of opportunity around Atlanta, where Bank of the Ozarks now operates a loan production office.

“Fundamentally, it is already overbuilt in every loan category imaginable,” Gleason said of the Atlanta market during the company’s annual shareholders meeting in April. “There are still gems to be sifted from the rubble.”

Counting operations in Florida, North Carolina, Alabama and South Carolina, the company oversees deposits of more than $870 million in five southeastern states.

(New acquisitions are followed by rapid deposit runoff. For more on that, click here.)

The bank’s Georgia total equals about half the bank’s deposits back home in Arkansas.

Bank of the Ozarks has come a long way from the humble loan production office in Charlotte, N.C., that for years served as a beachhead outpost for its regional aspirations.

“Now, we own a lot of beach, and we’re moving off our beachhead,” Gleason said at the April meeting.

Bank of the Ozarks is in the process of acquiring Genala Banc Inc. of Geneva, Ala., owner of the $170 million-asset Citizens Bank. Geneva is on the Florida border, about 80 miles north of Panama City, Fla.

Announced Oct. 4, 2012, the conventional transaction represents a $27.3 million combination of stock and cash.

Back in Florida

Johnny Allison, chairman of Home BancShares, said familiarity with the Florida market before the 2008 financial meltdown proved to be a double-edged sword for Centennial Bank.

The company operated bank offices in Florida that were hit by losses along with everyone else. But years of experience in the market provided insight into the resilience of the Florida market.

“The bad news: We were in Florida and lost about $20 million,” he said. “The good news is we were in Florida, and we understood the real estate market.

“The Gulf is still on the left and the Atlantic is still on the right. The weather is still warm, and the fish are still biting.

“At one time, Florida was the hottest banking market in the nation. I’m spending my money in a very, very dynamic market.

“We understand the market and have people on the ground, and we’re picking up new talent.

“The condo glut is gone. South Florida was the first to get hit and the first to recover, and the recovery is moving up the state to the Panhandle.”

Allison said the biggest competitors in the FDIC-assisted bidding wars come from a half-dozen groups of former bankers backed with investment pools courtesy of Wall Street.

These deal-driven bargain hunters are winning bids but are often making money-losing plays to do it, he said.

“There are bankers that parachuted in, and they had no idea and experience in Florida,” Allison said. “Those are the guys that overbid.

“We looked at 35 deals, bid on 30 and won six. It’s ‘Next.’ You can’t make something there that’s not.”

“That’s why you can’t fall in love with the deal. You just have to go on to the next one. There are stupid bidders out there.”

He believes there will be opportunities down the road to buy bank assets from parachute bidders who aren’t operationally equipped to make a profitable go with their failed bank acquisitions.

Bank of the Ozarks has explored more than 100 FDIC-assisted deals and won seven.

“We’ve certainly seen a lot of crazy bids lately,” Gleason told shareholders in April. “We’re not going to do crazy. We’re going to remain disciplined.”

Allison and Gleason have both noted there will be more bank failures and FDIC-assisted deals to bid on in 2013, after business returns to usual following the presidential election.

Both hope to capitalize on more regional opportunities.

“Somebody has to run these companies,” Allison said. “They get closed for a reason. The economy took them down, people made mistakes, whatever.

“It’s a generational opportunity.”