Presenting a live 90-minute webinar with interactive Q&A Pros and Cons of Bank Holding Companies: Determining Whether a Bank Holding Company Structure Makes Sense for Your Bank THURSDAY, OCTOBER 12, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Robert D. Klingler, Partner, Bryan Cave , Atlanta Clifford S. Stanford, Partner, Alston & Bird , Atlanta The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Pros & Cons of Bank Holding Companies Determining Whether a Bank Holding Company Structure Makes Sense for Your Bank October 12, 2017 Robert Klingler, Bryan Cave LLP Cliff Stanford, Alston & Bird
Why are we discussing this? 6
Bank of the Ozarks • $20 Billion, NASDAQ Listed, Institution (OZRK) • Arkansas Chartered, Non-Member, Bank • Locations in Arkansas, Georgia, Florida, North Carolina and Texas • National Lending Platform • New York City, Los Angeles and San Francisco • Eight Mergers Completed – 2012 - 2016 • Seven Government Assisted Deals – 2010 - 2011 • Consistently a Top Performing Bank Since Downturn 7
Bank of the Ozarks Eliminates BHC • April 11, 2017 • Announced Internal Reorganization • Merge Bank Holding Company into Bank • Focus on Efficiency • May 5, 2017 • Proxy Statement Filed • Rationale Provided • Simplified Financial Reporting • Elimination of Regulatory Oversight of BHC Activities • Decreased SEC Registration Fees • Consolidation of Governance and Organizational Structure and Elimination of Dual Boards of Directors and Joint Board Meetings 8
Bank of the Ozarks Eliminates BHC • June 23, 2017 • Special Meeting of Shareholders • 121.6 Million Shares Outstanding • 99.8 Million Shares Voted For the Merger • 0.05 Million Shares Voted Against and 0.06 Million Abstained • June 26, 2017 • Bank of the Ozarks, Inc. Merged into Bank of the Ozarks • Shares Automatically Converted into Shares of the Bank • Bank Assumed All Holding Company Equity Incentive Plans • Bank Assumed All Holding Company Subordinated Debt and Trust Preferred Securities • Same Ticker Symbol and CUSIP 9
BancorpSouth • $15 Billion, NYSE Listed, Institution (BXS) • Mississippi Chartered, Non-Member Bank • Locations in Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee, Texas and Illinois • Announced Two Acquisitions in January 2014 • Ouachita Bancshares Corp. (Monroe, LA, $650 Million) • Central Community Corp. (Temple, TX, $1.3 Billion) 10
BancorpSouth Bank Eliminates BHC • July 27, 2017 • Announced Corporate Reorganization • Merge Bank Holding Company into Bank • August 29, 2017 – Proxy Statement Filed • September 27, 2017 – Special Meeting of Shareholders • 91.0 Million Shares Outstanding • 71.5 Million Shares Voted For the Merger • 0.1 Million Shares Voted Against and 0.1 Million Abstained • Anticipating Regulatory Approval and Closing in Q4 11
Framing the Discussion 12
Current Landscape of the Industry 13
Predominant Structure Source: Board of Governors of the Federal Reserve System 14
More Data: • Nearly all US bank assets are controlled by BHCs • Top ten BHCs control ~60% of total assets • The percentage of U.S. banks owned by BHCs has more than doubled since 1980 • Note the growth in non- bank assets, particularly after Gramm-Leach-Bliley Act (1999) • Virtually all large BHCs are registered as FHCs • Only a handful of banks with more than $10 Billion in assets do not have a Source: holding company Federal Reserve Bank of New York (2012) 15
Bank Holding Companies Remain Common • Above $10 Billion – 115 Banks; 4 without a Holding Company • Above $1 Billion – Over 93% Have Holding Companies • Below $1 Billion – Over 82% Have Holding Companies • As of June 30, 2017 – 562 Independent Banks (<$0.2 Trillion) – 3,847 One Bank Holding Companies ($5.9 Trillion) – 602 Banks / 231 Multi Bank Holding Companies ($9.9 Trillion) – 776 Federal and State Savings Associations ($1.2 Trillion) 16
Decline in Multi Bank Holding Companies • 2006 – 1,670 Bank Charters – 518 Multi Bank Holding Companies • 2016 – 632 Charters – 241 Multi Bank Holding Companies • Overall, Decline of 2,769 Bank Charters in 10 Years • But… around 1,000 charters appear lost to internal reorgs 17
An Accident of History? • Bank Holding Company Act of 1956 • Originally: antitrust • Later: separation of banking and commerce • Gramm-Leach-Bliley Act of 1999 • Significant changes to mirror European and Asian universal bank model • Financial holding company designation • Umbrella supervision and functional regulation • Home Owners’ Loan Act § 10 • Unique scheme for SLHCs, but similar underlying principles • Grandfathered unitary thrift holding companies • Dodd-Frank Act 2010 • Significant increase in burden on holding companies • Collins Amendment and phase-out of trust preferred securities • Codification of source of strength doctrine • Established Fed as umbrella supervisor of SLHCs with convergent approach 18
Challenging Assumptions 19
Largest Banks Without a Holding Company Name State Exchange Total Assets (1) First Republic Bank California NYSE $80.0 Billion Signature Bank New York NASDAQ $40.7 Billion Bank of the Ozarks Arkansas NASDAQ $20.1 Billion BancorpSouth Bank (2) Mississippi NYSE $14.8 Billion TowneBank Virginia NASDAQ $8.4 Billion Opus Bank California NASDAQ $7.6 Billion Carter Bank & Trust Virginia OTC $4.3 Billion Community Bank California OTC $3.7 Billion (1) As of June 30, 2017. (2) In process of eliminating Holding Company. 20
A Strategic Choice? Potential Benefits: Considerations: • Simplified financial reporting • Fiduciary duty? • Elimination of supervisory oversight by • Not regulator-shopping the Fed • Public company considerations • Decreased SEC registration fees • Capital considerations • Consolidation of governance and • Asset size considerations organizational structure • Permissible non-bank activities • Boards • Banks vs. Thrifts • Policies and procedures • Choice of Law • Risk management • Relief from Regulation W constraints • With limited exceptions, there is no • No source of strength obligations to regulatory requirement for a holding bank subs company • Avoid separate DFAST stress testing • Certain non-bank activities • Tax savings • FBOs with >$50 Billion U.S. assets 21
Simplified De-BHC Process • Assess: change in control provisions, impact on compensation and benefit plans, assumption of any holding company debt (including trust preferred), tax obligations, non-bank subsidiaries, open regulatory issues, etc. • Ensure bank has sufficient authorized stock • Assess whether merger would violate Regulation W limits • Arms-length merger agreement • Typical structure is tax-free merger of holding company into bank • Board and shareholder approval • Public securities filings: 8-K(s), proxy statement, de-registration of holdco stock with SEC, registration of bank stock with bank regulator • Coordination with relevant securities exchange • File Bank Merger Act application with the FDIC • Complete merger and notify Fed 22
M&A and Regulatory Impacts 23
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