Today's volatile banking environment could give Arkansas' three publicly traded banks renewed opportunities to receive government assistance and acquire failed lenders, according to a report issued Tuesday.
Home BancShares Inc. Chairman and Chief Executive Officer John Allison said Tuesday the Conway lender has been actively pursuing potential acquisitions over the past 10 days. The first bank failure, Silicon Valley Bank of California, occurred March 10 and three other banks have collapsed since then.
"We've been all in for the last 10 days," Allison said Tuesday. "We're looking hard but it's just fluid. It's a moving target."
The bank, Allison said, has strong liquidity and avoided sinking money into low-interest security investments as many other banks did.
"This is an opportunity for us to deploy our excess capital," Allison added. "We're extremely interested in looking at the assets of these failed financial institutions."
Home BancShares made a major push into the Florida market during a similar banking crisis that began with the recession in 2008. As Centennial Bank, which Home BancShares uses as branding in markets, the company purchased seven Florida banks with assets of more than $1.6 billion from March 2010 to November 2012.
Officials with Bank OZK of Little Rock and Simmons First National Corp. of Pine Bluff declined to comment Tuesday on any renewed interest in potential acquisitions related to the upheaval in the industry.
Like Home BancShares, Bank OZK and Simmons also added assets during the 2008 recession.
Bank OZK purchased five banks in Georgia, one in Florida and one in South Carolina from March 2010 to April 2011. Simmons acquired three banks in Missouri and one in Kansas from May 2010 to October 2012. Total assets for the OZK purchases were $2.6 billion and just more than $1 billion for Simmons' acquisitions, according to the Stephens report.
The four recent national failures, and speculation that others may soon follow, could again create game-changing acquisition deals for potential purchasers, Stephens Inc.'s banking analysts said Tuesday in an industry note.
Besides Home BancShares, the report said Bank OZK and Simmons could be active acquirers as "the situation around bank liquidity remains fluid."
The Federal Deposit Insurance Corp. offered buyer-friendly terms to New York Community Bank to purchase certain assets of failed Signature Bank of New York in a deal announced Sunday. The transaction allowed New York Community Bank to buy Signature's most valuable assets while avoiding the problematic assets in the lender's digital-banking business. Those assets remain in receivership for the FDIC to sort out.
Federal regulators refer to acquisitions involving failed banks as "assisted mergers." From 2008-2013, the FDIC participated in 489 transactions during the financial crisis, according to the agency's records.
Stephens reported Tuesday that the Arkansas banks could be interested in acquisitions under similar favorable terms as those given in the Signature deal should opportunities arise. FDIC assisted mergers offer acquiring banks the opportunity to absorb the most valuable assets of the failed bank while the regulatory agency puts the most troubled holdings into receivership.
An added incentive to purchase failed institutions, the report said, is that "buyers' stocks ... tend to outperform" the market after acquiring a failed bank. For example, the stock of New York Community Bank shot up about 32% Monday after the deal was announced. The stock, which had been trading at $6.40 a week ago, was up another 7% Tuesday to $9.19.
The New York Community Bank transaction with Signature involved $38.4 billion of assets, including loans of $12.9 billion purchased at a discount of $2.7 billion. About $60 billion in loans remain in receivership, the FDIC said, including $4 billion in Signature assets related to the cryptocurrency industry.