Alabama National BanCorporation

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Alabama National BanCorporation

1927 First Avenue North
Birmingham, Alabama 35203
U.S.A.
Telephone: (205) 583-3600
Toll Free: (888) 583-3200
Fax: (205) 521-9307
Web site: http://www.alabamanational.com

Public Company
Founded: 1986
Employees: 1,492
Total Assets: $5.31 billion (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: ALAB
NAIC: 551111 Offices of Bank Holding Companies; 522110 Commercial Banking; 522120 Savings Institutions

Alabama National BanCorporation (ANB), a bank holding company, operates ten bank subsidiaries in Alabama, Florida, and Georgia. Through them the company offers full banking services to individuals and businesses. ANB also provides investment services and property and casualty insurance through its subsidiaries. The holding company's expansion was facilitated by relationships formed with smaller community banks.

Building Assets in Alabama: 1981–94

James A. Taylor purchased First National Bank of Ashland in 1981. He formed a bank holding company following the acquisition of three additional banks and served as chairman of the company. Two more banks and one thrift joined the Alabama National BanCorporation fold through 1993, according to American Banker.

Two acquisitions completed in the spring of 1994 boosted Alabama National's assets by $100 million. An initial public offering in November 1994 brought in $10 million. The funds were earmarked for long-term debt retirement and acquisitions of other financial institutions.

Plans to merge with another company of equal size were in the works in early spring 1995. Alabama National's CEO, CFO, and treasurer would step down and sell their stock if the deal went forward. The Shoal Creek based operation made the announcement in April 1995, in the wake of stock activity.

American Banker reported: "William P. Johnson, attorney for the holding company, said it 'made sense' to issue the early announcement, because 'there was some market movement, and we wanted to avoid the risk of some parties' trading with less information than others.'"

Alabama National's stock had risen from $8.75 per share at year-end 1994 to $11.62 per share in early April. Trading had been 16 percent above normal during the negotiating period preceding the announcement. Peoples Bank and Trust of Selma and Community Bank of Blountsville, the two Alabama banks with slightly more assets than Alabama National's $271 million, were considered potential merger partners, according to American Banker.

Commenting on Alabama National's performance, Raymond James & Associates Inc. analyst Richard X. Bove told American Banker, "Their strategy has been not to run the hottest bank in America, but to piece together low-cost deposits in community banks and build a nice little company ultimately to be acquired." Bove concluded, "They've executed this very admirably."

Unusual Move: 1995–97

Alabama National did merge, but with a bank holding $130 million more in assets. National Bank of Commerce (NBC), based in Birmingham, would become the wholly owned subsidiary of Alabama National. The move allowed the larger bank a less cumbersome entry into the public arena. NBC shareholders would own majority interest in the company and control the board of directors. The two Alabama families owning 80 percent of NBC would hold 50.1 percent of Alabama National after the deal was completed, according to American Banker. Alabama National assumed $17.9 million of NBC's debt.

Earlier in 1995, Alabama National lost to NBC in a bid for the control of a $35 million thrift bank. "In trying to acquire new banks, we were butting heads with them," Frank W. Whitehead, Alabama National's CFO, told American Banker in June. "They run a bank similar to the way we do, and we just thought it was foolish to be bidding against each other."

In May 1996, Alabama National's founder James A. Taylor resigned and John H. Holcomb III succeeded him as chairman and CEO. Holcomb, who had been president and chief operating officer (COO) of Alabama National, also continued as president and CEO of National Bank of Commerce of Birmingham. Victor E. Nichol, Jr., executive vice-president (EVP) of Alabama National, succeeded Holcomb as president and COO. Nichol, following 23 years with AmSouth Bancorp, joined NBC in 1994 as EVP and CFO.

Alabama National, with $929 million in assets, ranked as the sixth largest bank in its home state in 1997. The holding company increased its presence in the northern part of Alabama through the purchase of First American Bancorp of Decatur, a $223 million asset bank. Alabama National crossed the border in Florida that year. Citizens & Peoples Bank, N.A. opened in Escambia County.

New Territory: 1998–2002

In 1998, Alabama National continued to turn its attention outside of its home state. The company, already holding one office in the Florida Panhandle, purchased a small commercial bank in the hot central Florida market. The commercial bank based in St. Cloud held $50 million in assets.

"Our board of directors wanted the bank to keep its identity and remain a local, community bank," Jack Shoffner, president of Public Bank, told the Orlando Business Journal. "That's what really attracted the board to Alabama National—they have seven banking subsidiaries that are run as independent community banks."

Alabama National then looked to the peach state and acquired Georgia State Bank of Mableton. The suburban Atlanta bank held $124 million in assets. Alabama National would also purchase its parent company, Community Financial Corp., for an estimated total of $37.6 million.

In September 1998, Alabama National went forth with its third bank deal of the year, this time in Naples, Florida. The west Florida-based Community Bank held $80 million in assets. As with the earlier deals, this was a stock transaction.

Alabama National entered the insurance business in 1999, when First American Bank purchased Rankin Insurance Inc.

In 2000, Alabama National reported net income of $24.4 million. Its 1.19 percent return on average assets beat the industry's 1 percent benchmark for strong earnings.

Alabama National acquired another central Florida bank in 2001, the $130 million in assets Peoples State Bank of Groveland. The Alabama holding company, now with a network of 11 banks and $2.2 billion in assets, continued to allow acquired banks to hold their names, bank charters, management, and local board of directors, reported Jim Freer for Orlando Business Journal.

Alabama National President Richard Murray told Freer: "What made our banks successful was the involvement and local knowledge of senior management and boards of directors." He added, "We try to keep a hands-off approach, unless it is providing back-office help along with technology and products that we have developed within the holding company."

To keep up with larger competitors, Peoples State Bank needed to broaden its services, either through developing them from the ground up, hiring third-party vendors, or merging with another operation. Alabama National offered Peoples access to its securities division, mortgage banking company, and property and casualty insurance businesses. The merger also enabled Peoples to up its loan limit.

Although separate charters increased costs relative to its regulation obligations, Alabama National felt the earnings produced by the independent banks justified the cost. In addition, with its banks operating in and around major cities, but not within them, Alabama National generally did not have to compete head-to-head with SouthTrust, AmSouth, and Colonial Bank for its business customers.

Alabama National's insurance business, operating as ABA Insurance Services Inc., purchased two small agencies, one in Alabama, another in Florida, in the second half of 2002. The operation had expanded in areas served by Alabama National banks, opening offices in nine markets in Alabama, Florida, and Georgia.

As for the bank holding company, assets had climbed to $3.2 billion. Its 11 bank subsidiaries operated a total of 62 branches. The largest bank was Birmingham's National Bank of Commerce.

Relationship-Building Paying Off: 2003–05

Alabama National announced its second and third Florida acquisitions of the year in October 2003. The purchase of Indian River Banking Company of Vero Beach, Florida, would be the biggest deal to date for the holding company. The $520 million Indian River Banking promised to build Alabama National's presence in that high growth region. The transaction was valued at $107 million in stock.

The company also planned to buy Cypress Bankshares Inc. of Palm Coast, Florida, and the acquisition of Millennium Bank in Gainesville had closed in June. The two smaller Florida banks had $110 million and $130 million in assets, respectively. The three purchases boosted Alabama National's holdings in Florida to seven banks with a total of $1.4 billion in assets.

Company Perspectives:

Community Focus—Maintaining the local identities of our community banks provides a better understanding of our customers' needs in ANB's diverse markets. This insight enables us to tailor our product offerings and delivery channels to provide outstanding service to our customers.

The string of deals were a culmination of "relationship-building" begun in Florida several years earlier, according to John Pandtle, a Raymond James & Associates Inc. analyst quoted in American Banker.

All of the Florida bank acquisitions announced by Alabama National during 2003 were with banks that had relationships with the holding company. "In fact, most of the 12 banks the $3.9 billion-asset company owns were once customers of its bond division," Victor Nichol, Jr., Alabama National's vice-chairman and head of NBC Securities, told American Banker.

The investment subsidiary allowed Alabama National to engage in an acquisition strategy that set it apart from most other holding companies acquiring community banks. Few of its competitors for the smaller banks sold bonds or had correspondent banking arrangements, and much larger banks were not interested in purchasing them.

Alabama's relationships laid the groundwork for future purchases in the competitive Florida market and benefited the holding company when it came time to strike a deal.

Jefferson Harralson, an analyst with Keefe, Bruyette & Woods Inc. in New York, told American Banker that Alabama National was making banks deals when others could not and bought them at a price lower than average for the Florida community bank market.

Furthermore, Alabama National's investment services income rose 38 percent in 2003 primarily due to an increase in bond sales. The bond business was begun in 1995, when Alabama National hired Victor Nichol, Jr., and eight other traders when AmSouth Bancorp of Birmingham shut down its bond division. Five AmSouth support employees also were hired. Some in the group had worked together for a quarter of a century. The team had relationships with 250 community banks, primarily in Alabama and Florida. Alabama had added more than 100 more banks since that time and expanded in Mississippi, Tennessee, Louisiana, and Georgia, as well, according to American Banker. The bond business planned a move into Kentucky and South Carolina.

Peoples State Bank merged with Public Bank in June 2004. In July, Coquina Bank of Ormond Beach, Florida, was acquired. Coquina and Cypress banks, with adjacent markets, merged to form CypressCoquina Bank in August.

NBC Securities' Victor J. Nichol and five others in the investment subsidiary resigned in late 2004. Nichol had been vice-chairman since 2000, had served as president and chief operating officer from 1996 to 2000, and had served on the board of directors since 1995. Six employees remained. The holding company planned to continue operating its correspondent and investment businesses despite the departures.

Alabama National's net income increased 33.1 percent in 2004, rising to $54.6 million from $41.0 million in 2003. During the year the company's market capitalization topped $1 billion for the first time.

In February 2005, National Bank of Commerce and First American Bank subsidiaries merged as First American Bank. The new bank held $2.4 billion in assets and operated in 33 locations in north and central Alabama. In May, First Citizens Banks was to be added to the fold, bringing in more than $100 million in assets.

In March 2005, First Gulf Bank and Citizens & Peoples Bank, N.A. merged as First Gulf Bank, N.A. The $491 million asset bank was headquartered in Pensacola, Florida. The internal mergers would reduce the number of subsidiaries to ten.

Principal Subsidiaries

First American Bank.

Principal Competitors

AmSouth Bancorporation; The Colonial BancGroup, Inc.; Compass Bancshares, Inc.

Key Dates:

1981:: James A. Taylor lays groundwork for Alabama bank holding company.
1995:: Alabama National merges with National Bank of Commerce of Birmingham.
1997:: Company buys first bank outside of home state.
1999:: Company enters insurance business.
2003:: Alabama National announces largest acquisition in company history.
2005:: Internal consolidation reduces number of bank subsidiaries.