Timing is everything, if you’re prepared.


In August 2005, one of the country’s most devastating hurricanes battered the Gulf coast and severely impacted Hancock Holding Company, an $8.2-billion asset financial institution headquartered in Gulfport, Mississippi. The effects of Katrina tested President and CEO, Carl Chaney, and his team’s ability to survive when so many in that part of the country lost everything.

As a keynote speaker at Bank Director’s annual M&A event, Acquire or Be Acquired, in Scottsdale, Arizona, Chaney shared the story of how the bank’s back office operations were destroyed along with the complete destruction of a mini-branch leaving only the vault standing. However, Hancock saw this as an opportunity to help get their community back on its feet by literally laundering (washing storm tattered) money and putting it back into circulation. Two repossessed and damaged RV’s turned into portal branches as they worked their way through ravished neighborhoods putting money back into their community.

In the 90 days following Katrina, Hancock was able to grow their assets by $1.4 billion. When a disaster strikes, whether natural or economic, a board that is prepared for the opportunities will separate the leaders from the pack.

Then came the financial meltdown of 2008, and the flight to quality during this time allowed Hancock to grow another $1.1-billion in the fourth quarter of 2008, approximately 90 days after the crisis.

So how did they do it? Chaney’s process is one that he adamantly believes helped his bank take advantages of opportunities where others saw none.

1. Do your homework. Gather as much demographic and economic data on the markets your comfortable expanding into, and then study that data to make sure you are capable of succeeding there.

2. Use Visuals. Chaney recommends that you get a map, plot out those areas, and make a list of the top ten banks in those markets. Then do a competitive analysis on each one to determine what banks may become available.

3. Discuss and Decide. Gather the data you’ve collected, then conduct a one day board meeting off-site to go through the data, discuss each market and then prioritize them based on attractiveness. Chaney recommends that a board be picky, and take the time to fully understand how much and what type of growth the bank can manage. Make sure the board and management team is on the same page to ensure that everyone is prepared before the opportunity arises.

Chaney and his board participated in this thorough process which allowed them to acquire the failed bank People’s First of Panama City, Florida, in early December 2009. Hancock had indicated that People’s First was a bank on their list that met their criteria based on that strategic off-site meeting. So when the FDIC asked them take it over, and be able to handle transactions within the next four days during the holiday (and hunting) season, his board was ready, the deal went through and Hancock opened their new branches the week before Christmas.

The bank’s recent acquisition of Whitney Holding Company out of New Orleans, Louisiana in December 2010 was another institution on the list, and with conversations already in the works, Hancock was ready to acquire the $11.5-billion asset institution when the opportunity finally presented itself.

“It’s time for attitude adjustment,” Chaney said in his closing. “Stop being ashamed and be proud to be a community banker.” Any bank with a board that is prepared and remains disciplined can be a very successful institution. “Good deals rarely come on payday.”

Growing through Relationships

Our annual M&A conference, Acquire or Be Acquired was off to a good start this past Sunday in sunny Scottsdale Arizona with close to 700 attendees representing 265 financial institutions from around the country. After an early morning round of interactive workshops, several hundred banking professionals and industry experts gathered in the large Arizona ballroom to hear from two bank CEOs who have had success growing their institutions despite the challenging economy and it’s impact on the financial services industry.

As DeVan Ard, President and CEO of Reliant Bank a $400-million asset institution out of Nashville Tennessee, and Andrew Samuel, Chairman and CEO of Tower Bancorp Inc., a $2.7-billion asset holding company out of Enola, Pennsylvania described their markets, cultures and growth strategies, a pattern began to emerge between the two institutions despite the differences in their location, size and business lines.


Both focused on their strengths
During Ard’s presentation, he encouraged the audience to stay focused on building value to the franchise through bank relationships, rather than becoming solely credit driven. He attributed the success of Reliant Bank on its ability to remain focused on what made it profitable.

Tower Bancorp’s approach was quite similar in that Samuel recommended that his fellow bankers recognize what they do well, know their markets inside and out, and resist the temptation to look at other opportunities that don’t fit your core business model.

Both embraced relationship banking
It was clear that both institutions valued the relationships that they had built with their customers, employees, shareholders and other strategic partners. Reliant Bank was able to grow their post-recession deposits by 5-6 percent by leveraging existing relationships with customers and asking for referrals.

By knowing their market, Tower Bancorp was able to design fee-based products specifically for local not-for-profit groups whose boards were filled with the who’s who of their community, thus providing an intangible value to the bank. As a result, the bank created an advisory board to focus solely on this niche market.

Both overly communicate with everyone, including their regulators
It was certainly a common discussion throughout this year’s conference whether the regulatory challenges would take away from the ability to focus strategically on growth. Ard and Samuel both recognized that this was indeed a challenge, however by being proactive and keeping the lines of communication open with the regulators, they have little chance to be surprised.

In addition, Ard felt it was equally important to over communicate with employees, shareholders, media, and the community. By sharing with the employees the financial position of the institution, Reliant Bank was able to get the employees to buy into the plan to slow down growth as they weathered the economic downturn.

Both always look for acquisitions opportunities
Reliant Bank and Tower Bancorp are always on the lookout for potential acquisition opportunities with each having acquired branches and/or other banks within the past few years, however they never lost sight of growing organically. With over 800 banks still on the troubled list and many bankers simply suffering from fatigue, acquisitions are still a viable growth option for both institutions.

At Tower Bancorp, the acquisition strategy is simple, Samuel is responsible for creating strategic partnerships with larger banks in the area as well as actively calling on banks in the surrounding markets to negotiate potential acquisition deals. By building relationships with these potential future sellers, those banks are more open to working with Tower Bancorp, once their board makes the decision to sell.

Samuel still believes that Tower Bancorp can achieve a loan growth figure in the double-digits this year but remains steadfastly focused on organic growth. His acquisition process ensures that not every executive member of institution is involved throughout the entire process. By sharing the responsibilities across the board and senior management, the team has less opportunities to neglect their first priority of organic growth.


Both work diligently with their board
Involving the board throughout the entire process is key to both institutions success. At Reliant Bank, their three year strategic planning started with management, who then shared and received feedback from the board which was ultimately executed by the senior management team. Each quarter they meet to review the tactical plan to make sure it’s in alignment with the overall strategy.

Samuel indicated that Tower Bancorp followed a similar approach with a three-year strategic plan that is reviewed nine times a year. The board is always aware and proactively engaged with the executive team.

Two stories of success from two types of banks — one privately-held, one publicly-traded — one in the south, one located in the north, yet both remained focused on what they were good at while leveraging key relationships to ensure the growth of their organizations during the financial crisis.

Optimists, Welcome.

Since returning from the west coast a few weeks ago, I’ve read a number of reports, white papers and yes, promotional pieces that suggest a wide-spread optimism for the financial industry in 2011. With U.S. banks expanding their loans to consumers for the first time in years, and a number of institutions releasing earnings this week (expectations are high for stellar Q4 numbers), one can see why. In fact, JPMorgan Chase may have laid the foundation when it reported a 47% jump in fourth-quarter earnings to $4.8 billion, or $1.12 per share on Friday.

So all of this enthusiasm and excitement has me grabbing as much data and financial information as possible to form my own opinions. While sifting through a number of bank analyst reports, I randomly came across a sentence on Bain‘s website that I wholly endorse: 

…turbulence does present opportunities for savvy players in all regions to out-perform the overall “average” through such means as cost reduction, strategies to gather new deposits and customers, challenging troubled competitors and, where strength exists, targeted M&A activities.

To the management consulting firm’s last point, I’ve been hearing from a number of our investment banking partners speculation that the pent up demand to buy and sell banks might pop this year. If the record numbers of officers and directors signing up to attend our annual “Acquire or Be Acquired” conference serves as an indicator, how right they will be. 

For those attending this year’s event, expect to hear the case made for buying and/or owning bank stocks thanks to “greater clarity on the regulatory front, historically attractive normalized EPS and book value multiples, and the prospect of a revival in whole bank mergers” (*I can’t claim credit for this outlook; the good folks at Stifel Nicolaus offered such an opinion in a recent analyst report entitled “Random Thoughts on Banking: Why Own Banks?”). 

In a few weeks, more than 600 of the industry’s leaders will discuss how recent financial reform (and revised capital standards) has impacted capital structure, valuation and strategic activity. And we’ll prepare for what seems inevitable: a coming wave of M&A. So are things looking up? I guess you can say all signs point to becoming cautiously optimistic. 

Pros & Cons of Traditional M&A vs. FDIC-Assisted Transactions

handshake.jpgWith the financial industry cautiously anticipating a recovery from the dramatic economic crisis that resulted in increased regulations and scrutiny for banks of all sizes, many are hoping to see increased activity from traditional M&A transactions. Although the number and size of bank failures is slowing down, FDIC-Assisted deals should not be discounted as a viable growth opportunity in 2011.

As part of our Inside the Boardroom interview series, Rick Childs, a director in Crowe Horwath LLP’s financial advisory services group, outlines below the pros and cons of traditional M&A vs. FDIC-Assisted transactions, and what today’s boards should know before considering these two options.

What are the pros & cons of traditional M&A vs. FDIC-Assisted deals?



  • There is more time to perform due diligence and to understand how the organization fits your culture and business plan.
  • Traditional M&A deals are usually negotiated with a single buyer. If a potential acquirer can negotiate and improve its chances of winning the transaction. In an FDIC-assisted transaction, the agency is required by law to select the bid that entails the lowest cost to the FDIC insurance fund. As a result, competition for the bid can decrease the odds of the bidders being successful.
  • In 2010, there were still a number of deals where the target’s earnings were positive. In approximately 42 percent of the traditional M&A deals the target had positive earnings and approximately 26 percent had ROAs in excess of 50 percent. Institutions with positive earnings provide growth opportunities at attractive prices.


  • The level of non-performing assets in some of the deals may still make the transaction prohibitive without FDIC loss protection. While bidders for FDIC-assisted deals are able to bid the assets acquired at a discount, the traditional M&A buyers cannot bid less than $0. Or, to put it another way, the sellers of whole institutions are not in a position to pay the buyer to take over the institution while the FDIC-assisted transaction is able to absorb the negative bids.
  • With prices for healthy institutions still depressed, there are fewer healthy sellers. Likely these institutions are waiting for prices to return to historical—which is to say higher-levels, although it’s unclear whether that will every happen.



  • The protection afforded from loss sharing has been a catalyst for getting bidders to participate in the bidding process and makes the transaction palatable on a prospective basis as the future losses are covered by loss sharing.
  • For many acquirers, it has offered a unique growth opportunity and there have been a number of serial FDIC-assisted transaction acquirers who have been able to raise capital and build long-term franchise value.
  • Buyers have been able to acquire assets and liabilities but leave behind unfavorable contracts and any potential litigation risks that would be associated with a failed institution.
  • The potential for bargain purchase gains can provide capital for the acquiring institution. However, those institutions should expect the regulatory agencies to exclude capital arising from a bargain purchase until the valuations have been finalized and then validated through examination or external audit.


  • The loss sharing contract requirements can be time consuming and expensive to comply with, including reporting, systems and the required loan modification commitments.
  • Limited due diligence and a compressed time frame for the transaction translate into the bidder needing to make a significant number of material estimates to arrive at the bid with limited information. This can lead to unexpected results post transaction.

What is the outlook for both types of deals?

Trends in acquisitions of both types of deals increased in 2010 compared to 2009. On September 30, 2010, the FDIC reported 860 troubled institutions, up from 720 at December 31, 2009. If only 10 percent of those institutions ultimately fail, then 2011 will still see a significant number of transactions.

The total assets of troubled institutions are actually lower than at December 31, 2009, so the transactions likely will be of smaller sized institutions. Traditional M&A transactions also appear to be ready for an increase in activity in 2011, although still tempered compared to more recent history before the current financial crisis.

Are the FDIC-Assisted deals still attractive, or have they lost their allure since the FDIC is providing less loss protection?

The deals are still attractive and what the bidders appear to be doing is considering the level of expected losses including the revised coverage into their bids. In the 4th quarter of 2010 the asset discount on the deals with loss sharing increased over the prior quarters. Further, about 15 percent of transactions in 2010 didn’t include a loss sharing agreement, and in those transactions the asset discount was approximately twice as much as the loss sharing transactions. Our experience with bidders has been that they adjust to the changes in the FDIC structures.

Is this change in loss protection making traditional deals more competitive?

The changes in the loss sharing agreements do not appear to be changing the landscape. Bidders adjust their bids to encompass the expectations of losses. At the same time, buyers in traditional deals are including contingent payments, escrows and other holdbacks tied to credit performance as ways of providing some protection against future losses.

What are the impediments to getting traditional M&A deals done?

Capital is clearly an issue for many acquirers in traditional deals, and because the discounts on traditional deals are limited by the level of capital, some deals actually produce goodwill once the purchase accounting adjustments are all recorded. Regulators are expecting higher levels of capital and as a result the available buyer pool may be limited. Additionally, many potential sellers may be waiting until prices rebound and the returns to shareholders are maximized.

Potential acquirers are also weighing the ongoing costs of acquiring an institution with significant credit problems. The time and expense related to working out a significant number of problem credits can be prohibitive for some institutions. Finally, activity in certain states has been nominal in the last several years, so for buyers in those states, a potential transaction may be well outside their market area and that can be an impediment.

The Recipe for Success at Reliant Bank

recipe.jpgWith the end of 2010 quickly approaching, there’s no doubt that many bankers won’t be sad to see the end of yet another tumultuous year for the financial industry. However, the outlook for this badly bruised industry is beginning to show signs of improvement per a historical trends analysis shared by Ben Plotkin, EVP and vice chairman at the investment banking firm Stifel Nicolaus Weisel, during our recent Bank Executive and Board Compensation event.

Looking Toward the Future

Looking ahead to 2011, I had the opportunity to speak with fellow Nashvillian and CEO of Reliant Bank, DeVan Ard, who coincidentally will be speaking at our upcoming Acquire or Be Acquired conference scheduled for January 29th through February 1st in Scottsdale, Arizona. After briefly catching up, DeVan reiterated to me a theme that I have heard throughout the past few months, that this is most definitely a challenging time for bankers.

But the question on my mind was how did Reliant Bank, a $400-million community bank, manage to achieve over 46% growth in assets from 2008 to 2010 despite one of the worst economic downturns this country as faced since the 1930s? The answer to that question also happens to be the focus of DeVan’s panel next month, as he and Andrew Samuel, the CEO of Tower Bancorp Inc. in Enola, PA, will share their philosophies and methods for profitably growing their institutions during these competitive and challenging times.

Recipe of Success

As a non-TARP bank, DeVan attributes the continuing success of Reliant Bank to a talented team of employees, a strong board of directors invested financially and personally into the bank, and the continued dedication of building solid customer relationships.

Although DeVan ponders if he would even join the board of a bank today with all the regulations and liability piled on already stretched bank directors, he is confident that smart business decisions and good strategic planning goes a long way. Over the next few years, as loan demand continues to decline, Reliant Bank plans to improve interest margins, reduce expenses across the institution and look for non-interest partnerships to stretch profitability rather than focus on growth.

Results vs. Regulation

The trickle down effect of regulations aimed at larger institutions will most certainly hurt many small community banks proving once again that a few bad apples spoil the bunch. But with an engaged and invested group of directors who aid in the business development of the bank and are determined to make a positive impact in their community, hopefully Reliant Bank’s results will speak louder than regulations.