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Banks set range of objectives to achieve longer-term goals

Geographic expansion underscores growth strategies

Tupelo — Read the pages of financial services industry magazines, and it’s clear that geographic expansion has underscored the growth strategies of many banks of all sizes throughout the country. But as banks look to new markets, they are doing so with very specific objectives to meet longer-term strategic goals.

Additionally, many are diversifying the means by which they enter markets, with initiatives ranging from mergers and acquisitions to de novo entries.

The expansion efforts of Tupelo-based BancorpSouth provide insight into this type of strategic thinking.

Geographic expansion not new

Strategic geographic expansion is nothing new for BancorpSouth, which has grown to an $11.1-billion-asset company doing business in six states across the mid-South. Rather, the company’s current plans are a continuation of a primary growth strategy that CEO Aubrey Patterson said the company has steadily implemented for years.

As part of a recent company presentation to analysts in New York and during a subsequent MBJ interview, Patterson reviewed the hallmarks of the BancorpSouth expansion strategy. While BancorpSouth’s mid-South territory includes a broad range of diverse markets, the company’s expansion plans are focused within the company’s six-state footprint of Mississippi, Alabama, Tennessee, Arkansas, Louisiana and Texas and in contiguous states.

Patterson said that target areas typically demonstrate double-digit growth in population in the decade measured by the 2000 census or in double-digit deposit growth over the last two years, or both. He points to the bank’s more recent Nashville, Tenn., and Baton Rouge, La., market entries as examples of this approach.

Considering the circumstances

But Patterson also added that the company’s method of expansion varies depending on the circumstances. For example, BancorpSouth established its initial presence in the Baton Rouge market in 2003 through the acquisition of Louisiana’s oldest and largest insurance agency and then expanded its presence with the acquisition of a bank in Baton Rouge in December 2004. To enter the Nashville market, BancorpSouth opened a loan production office in its Brentwood suburb in 2003, then followed with a bank acquisition last December. He added that the company is now expanding both branch networks.

In August of this year, the company signed a definitive merger agreement with American State Bank Corporation of Jonesboro, Ark., which it expects to consummate at the end of this month.

“This acquisition will expand our market presence in the attractive and growing Northeast Arkansas market,” Patterson said, referencing Jonesboro as the trade, cultural and medical center for the northeastern part of that state and for southeastern Missouri.

Additionally, Patterson noted that the company has demonstrated its ability to expand on a de novo (Latin for “from the beginning” or “newly started”) basis, as it has in Longview, Texas, where the company operates a new full-service bank, and in Lufkin, Texas, where it opened a banking office in March of this year.

“In our growing East Texas market area, we see strong potential to further expand our presence into such areas as Tyler and on toward Dallas and Houston,” Patterson said.

Addressing market needs

Continuing on the de novo strategy, Patterson noted the company’s recent establishment of a loan production office (LPO) in Gulf Shores, Ala. Another newly-opened loan production office in Northwest Arkansas expands what Patterson cited as “our already significant presence in and around Fort Smith into rapidly growing cities like Fayetteville, Rogers, Springdale and Bentonville. Patterson added that the Northwest Arkansas MSA is one of the nation’s fastest-growing urban areas.

Patterson said that the company carefully assesses the markets and the tools that meet the company’s longer-term objectives as it weighs individual expansion opportunities.

“We don’t just pop into a market and open an LPO,” Patterson said. “Each case is market-specific.”

Additionally, Patterson stated that if an LPO is established, there’s a specific purpose and objective in determining whether or not it is developed further. Noting the Brentwood experience, for example, Patterson said, “We got to the point where we needed an anchor branch.”

As in many other facets of banking practice, analysts observed that staffing is a critical factor in an expansion effort’s success. Additionally, they stated that it is important to distinguish skill sets, as a strong LPO developer may differ from a market developer.

Contact MBJ contributing writer Karen Kahler Holliday at mbj@msbusiness.com.

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