trending Market Intelligence /marketintelligence/en/news-insights/trending/3buwfNO16Kvlu6RE94z8mQ2 content esgSubNav
In This List

Pinnacle touts 'compelling economics' of $1.9B purchase of BNC


Banking Essentials Newsletter: 17th April Edition


Banking Essentials Newsletter: 7th February Edition

Case Study

A Bank Outsources Data Gathering to Meet Basel III Regulations


Private Markets 360° | Episode 8: Powering the Global Private Markets (with Adam Kansler of S&P Global Market Intelligence)

Pinnacle touts 'compelling economics' of $1.9B purchase of BNC

Nashville, Tenn-based Pinnacle Financial Partners Inc. executives said Jan. 23 that the planned purchase of High Point, N.C.-based BNC Bancorp will significantly accelerate the company's expansion in targeted Southeastern markets and offer a considerable boost to earnings.

Late on Jan. 22, Pinnacle announced plans to expand its franchise in the Carolinas and Virginia with the $1.9 billion purchase of BNC Bancorp. Pinnacle said the partnership will improve its return on assets, return on common equity and its efficiency ratio metrics and create a top 50 U.S. bank by assets.

M. Terry Turner, president and CEO of Pinnacle, said on a conference call to discuss the deal that the company expects the pro forma franchise to produce a return on average assets in the range of 1.30% to 1.50%, up from its prior target of 1.20% to 1.40%.

"I don't recall a transaction with more compelling economics," Turner said on the call.

Pinnacle expects the deal to be approximately 10% accretive to 2018 EPS, while offering a 5% initial accretion to tangible book value.

Turner said the company wants to target large urban markets dominated by regional banks and then compete with local, experienced management. Turner said Pinnacle has demonstrated the ability to execute on that strategy in past acquisitions like CapitalMark Bank & Trust and Magna Bank and believes the purchase of BNC will offer the same opportunity.

Turner further noted that the company told the Street last week that its three-year strategic plan contemplated the exploration of acquisition opportunities in some of the "most attractive southeastern markets," including Atlanta; Charlotte and Raleigh, N.C.; Charleston, S.C.; and Richmond, Va. BNC operates in three of those five markets, Pinnacle executives noted.

Turner said the acquisition is not without challenges but believes the retention of key management at BNC, including President and CEO Rick Callicutt II, who will serve as chairman of the Carolinas and Virginia, and CFO David Spencer, who will serve as executive vice president of the pro forma franchise, will help mitigate that risk.

Pinnacle Financial executives identified potential revenue synergies from the transaction but did not include any potential benefits in its modeling. Pinnacle noted that it should be able to leverage its commercial and industrial lending capabilities and offer a robust treasury management platform in BNC's markets.

Callicutt added on the call that BNC will gain a commercial mortgage platform, while the transaction will allow his bankers to pursue larger clients and achieve better pricing for wholesale funding opportunities.

Callicutt said the deal was a negotiated transaction, with discussions beginning in October, not long after his company concluded its strategic planning meeting.

Both Callicutt and Turner said the two companies have similar cultures with a "lot of hustle." Turner further emphasized that Pinnacle will not change its organic growth strategy of hiring experienced bankers and giving them autonomy. He noted that lenders in Charlotte will "keep making loan decisions in Charlotte," while lenders in Chattanooga, Tenn., will "keep making loan decisions in Chattanooga."