Investors buy Community Bank & Trust, plan geographic expansion

Community Bank & Trust - Alabama is the latest US bank to be acquired by an investor group.

LS Investor Group LLC closed its acquisition of the bank, which was renamed LifeSteps Bank & Trust in January. The bank, which is still based in Union Springs, Ala., but will soon move its headquarters to Huntsville, Ala., will serve small businesses and offer private wealth management to their owners.

The investors were advised by DD&F Consulting Group and Alston & Bird LLP, while Community Bank & Trust was advised by Troutman Pepper Hamilton Sanders LLP. The terms of the deal were not disclosed.

Investor acquisitions of banks have spiked recently as groups seek to sidestep the de novo process.

"It is becoming more difficult to establish a brand-new bank with a net new charter as a de novo bank, and so this pathway allowed us an opportunity to inherit an operating bank," John Johnson, president and chief credit officer of LifeSteps Bank & Trust, said in an interview. "It accelerates the time frame ... from identification to acquisition, and then because it's already operating, we didn't have to spend as much on the infrastructure of the bank."

The challenging environment for starting a de novo bank has led to a massive decline in the number of new banks, a recent S&P Global Market Intelligence analysis found. For example, it is much more costly to start a new institution as banking has become more digital. For LS Investor Group, side-stepping the core provider search was one advantage of the deal versus the de novo route, executives said. The group is still using the bank's prior core provider, Jack Henry & Associates Inc.

But the bank acquisition process does not come without its own hurdles, namely increased regulatory scrutiny.

The group has been pursuing the sale since at least October 2023, when LifeSteps Bank & Trust co-founder and CEO R. Hill Womble told S&P Global Market Intelligence that regulators want more bank experience from investors than they used to.

Womble has prior bank experience, having served as a community bank CEO. The investor group's other planned leadership includes CFO and COO Dana Potts, who has experience serving as a bank CEO and CFO. It also includes a board member and compliance coordinator who have both previously worked at the Office of the Comptroller of the Currency.

The executive team's experience helped ease the regulators' decision, Womble said. The bank's regulators are the Alabama State Banking Department and the Federal Deposit Insurance Corp.

"Hence our approval was pretty quick," Womble said in an interview. "If we have questions or comments or concerns about something, we just call them, and I think that goes a long way as well as having really strong, open relationships with the regulatory agency."

Looking ahead

With regulatory approval secured and the transaction closed, the executives are charting a new path for LifeSteps Bank & Trust.

Community Bank & Trust's efficiency ratio was 115.41% and a return on average assets of negative 0.81% for the fourth quarter of 2023, according to S&P Global Market Intelligence. Since the deal closed in January, executives have been focused on running LifeSteps Bank & Trust in a way that is as "operationally lean as possible," Johnson said. "We're highly engaged in modernizing and running the bank," Johnson added.

The next steps are to expand into the Huntsville area and add wealth management services in late 2024, subject to regulatory approval, according to a press release. Management said they are not interested in bank acquisitions for now.

Management hopes to make the bank a one-stop shop for customers.

LifeSteps Bank & Trust's goal is to "eventually, seamlessly move that customer through their whole financial plan instead of having to rely on a lot of different people to implement that," Johnson said in the interview. "So they'll be surrounded by folks that know them, know what their ultimate goals are, and when their goals change as they inevitably do over the course of their life, we're ready to be able to then mobilize those strategies when they're ready."

The bank is also looking to grow geographically in markets similar to Huntsville, which has many defense contractors, Womble said. Executives are looking to expand in markets that are the "entrepreneurial spirit type ... [and have] a lot of potential to grow," the CEO said.

The executives pointed to Nashville, Tenn., or Charleston or Greenville, SC, which have "heavy medical, upper entrepreneurial, upper manufacturing and white-collar job in that community [and] a high-growth rate, good education base," Johnson said.

Community Bank & Trust - Alabama operates one branch in Bullock County, Ala., ranked second with a 37.67% share of about $120.4 million in total market deposits, according to S&P Global Market Intelligence data.

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