A few days before Orion Bank's collapse in late 2009, John Allison paid a visit to the Naples-based bank's flamboyant chairman and CEO, Jerry Williams.
Over dinner and drinks, Allison says Williams privately admitted the severity of Orion's regulatory problems. A few days after their meeting, Allison's Arkansas-based bank, Centennial Bank, bid for the assets of the Naples bank at the swiftly arranged government auction.
Centennial's bid for Orion was just shy of the winning bid by Louisiana-based IberiaBank. But that hasn't stopped Allison from bidding on 27 banks in Florida during the downturn, ultimately winning eight of them through the government-auction process. In addition, the bank acquired another three Florida financial institutions without government assistance and it recently opened a new branch from scratch in Naples.
“We've done more failed-bank acquisitions than anybody else in Florida,” says Allison, who has lived and owned a bank in the Keys for more than two decades. (He is not related to the former CEO of BB&T Bank with the same name.)
The list of Florida banks Allison's group has acquired over the last five years is impressive: Old Southern Bank, Key West Bank, Coastal Community Bank, Bayside Savings Bank, Wakulla Bank, Gulf State Community Bank, Vision Bank, Premier Bank, Heritage Bank of Florida, Florida Traditions Bank and Broward Financial Holdings.
Centennial Bank has been on a mission to grow in Florida using the parent company's publicly traded stock as currency. Parent Home Bancshares trades on Nasdaq (symbol: HOMB; recent price: $31).
Allison isn't done. “We've got 16 banks right now talking to us about a trade,” he says.
Allison says Florida's recent banking crisis was akin to the one that hit Texas in the late 1980s, and he spotted another rare opportunity to buy banks at a steep discount. “We put in a 25-man special asset team in Florida,” Allison says.
In 2009, during the depths of the financial crisis, Allison and his partners raised $107 million from investors. Fortunately, that state's shale deposits created an oil boom that spared Arkansas and Centennial Bank from the recession.
Today, Centennial Bank has branches scattered from the urban areas of Tampa and Fort Lauderdale to the tiny Panhandle hamlets of Wewahitchka and Blountstown. Besides the Tampa Bay area, Centennial has branches on the Gulf Coast in Marco Island, Naples, Port Charlotte and Punta Gorda. With nearly $7.4 billion in assets, the bank now has 61 branches throughout Florida.
Allison says he's looking to make more acquisitions. He's scouting Florida banks, especially those with $1 billion in assets or more, so Centennial can reach $10 billion in assets next year.
The challenge is that there aren't many banks headquartered on the Gulf Coast that are that size, according to the Federal Deposit Insurance Corp. There are just four banks in the region with more than $1 billion in assets, all of them headquartered in the Tampa Bay area: Raymond James Bank, USAmeribank, C1 Bank and The Bank of Tampa. Statewide, there are 24 banks headquartered in Florida with $1 billion or more in assets.
What's more, there are plenty of other acquirers circling the same banks. That includes Arkansas rival Bank of the Ozarks, which also has branches in the Tampa Bay area.
Despite the financial wherewithal, Allison isn't throwing money around. “Home BancShares is not going to get stupid,” Allison says. “It's a very disciplined purchase deal.”
The bank recently paid about 1.6 times tangible book value for Broward Financial, the parent of Broward Bank of Commerce in Fort Lauderdale. During the last boom, banks were trading at double that ratio or more, and Allison says it's unrealistic for them to expect those prices again. “Buyers get utopia,” he chuckles.
Allison says paying too much for a bank will hurt shareholders in the long run. “If you're not getting double-digit returns, you're doing a disservice to your shareholders,” he says.
But Allison won't shy away from building bank branches from scratch like he is in Naples. For example, Thomas Longe, the former chairman, CEO and president of Naples-based TIB Financial, recently joined the board of directors of Home BancShares and will work with Brian Tinney, the newly appointed president for the Naples market, to grow that area. “We're not afraid to buy more and build more,” Allison says.
Allison is confident about Florida's growth and the solidity of the economic recovery. “We're doing condo loans,” he says. “It's real buyers with real money.” Allison speaks from personal experience: “I bought another airplane the other day — used,” he smiles.
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