Banking on Basics

Paul Murphy launched Cadence Bank in the middle of the financial crisis. Could it overcome the ominous environment and assume steady growth?

One year into the financial crisis that sent hundreds of banks into failure, Paul Murphy rose to a new challenge: raise enough money to build a new bank that would assume steady growth despite challenging economic conditions. The way wouldn’t be easy, but the seasoned banking executive was not discouraged.

By the end of 2009, 140 banks had been seized by the Federal Deposit Insurance Corporation (FDIC), an almost 500 percent increase over 2008. At the time, Murphy was working as the CEO of the Houston-based $11 billion Amegy Bank, which he cofounded in 1992, and wasn’t looking for a change. However, when the board of directors at Cadence Bancorp, LLC (formerly Community Bancorp, LLC) approached him with a proposal, he couldn’t say no.

Talking Leadership With
Paul Murphy

What is the first step to getting someone on board with a new idea or initiative?
The first step is getting people open to hearing a new idea. You say, “Just hear me out.” Then you present the idea, explain what due diligence the person needs to do to make a decision, then ask for a decision.

When do you stand up for your vision?
You always want to articulate your vision and come back to it. It’s home base.

What’s the difference between an idea and an opportunity?
An idea can be good or bad. If due diligence shows it’s good, it’s an opportunity.

When do you abandon a course of action?
I believe persistence pays off. We don’t give up at the first sign of trouble. But, not every idea is a good idea, and if something doesn’t work, we reassess. You can’t be blindly committed to an idea if it’s not well received by customers.

How can a leader be an inspiration to his or her staff?
Be sincere and consistent regarding your mission. People aren’t interested in rah-rah leadership; they’re interested in thoughtful and sincere ideas that will be successful if they work hard.


The board of Cadence Bancorp was composed of some bold thinkers who thought the distressed financial industry was at a prime place for new investment. The opportunity they saw was threefold. “First, a lot of banks had high levels of nonperforming assets, and we thought we could buy a bank from the FDIC at a good price,” explains Murphy. “Second, unemployment was high, and we thought we could attract top talent. Third, we saw an opportunity to go on the offensive when so many others banks were experiencing regulatory difficulties and were thus unable to be responsive to customer needs and proactive in growing their businesses.”

When asked if he considered the potential folly of this plan, Murphy says, “Oh, sure. While I say it was an opportune time, it certainly wasn’t without challenges. It depends on your investment horizon, however. We were talking about a 15-year investment. As we told our shareholders, it was a good time to buy, but value creation would be attributed more to how we operate the bank over time than the timing.” 


To put the plan into action, Murphy’s first task was raising capital. That was no small undertaking for a start-up, but Murphy—with the assistance of the bank’s board of directors, including Scott Stuart at Sageview Capital LP—hit the road. “We went to potential investors—major pension plans, university endowments—and told them the story,” Murphy says. “Here’s our previous operating model, here’s our board of directors, here’s the distressed landscape, here’s the team we put together to operate.”

Within a 10-month period, Murphy and the board had raised $1 billion despite the liquidity crisis that the global economy was facing. “All I can say about how that happened is, it’s a great country,” Murphy says.

With a lot more than chump change in his pocket, Murphy and the board then started looking at banks. He did due diligence on more than 125 banks, but many were so heavily distressed he didn’t see an investment opportunity. He finally entered price talks with five or six.

The first target was the 126-year-old Cadence Bank, which had several advantages, including 29 years of consecutive earnings growth, stable core deposits, and a good customer base. However, Cadence faced problems that stemmed from a 2006 and 2007 expansion into Florida and Tennessee. Still, Murphy thought it was the perfect opportunity. “We bought it outright,” he says of the 2011 purchase.

Then, somewhat serendipitously, Superior Bank failed in what was the largest FDIC seizure since Murphy and the board had raised their money. The bank had locations in Alabama and Florida, and, in April 2011, Murphy and his team purchased it from the FDIC and recapitalized it.

Finally, in March of 2012, Murphy and the board added Houston-based Encore Bank to the Cadence portfolio. “It was a squeaky-clean franchise, not distressed at all, but we put it under contract because it gave us access to Texas,” Murphy says. 


Murphy says his operating strategy is based on an old-fashioned formula: good customer service. “No customer is too small,” he says. Additionally, a successful business has to be a fabulous place to work. That starts with recognizing that every job is important, giving employees the tools they need to be responsive, and rewarding them for good performance. “We have good compensation programs, with equity participation for many bankers,” says Murphy, whose strategy is so successful that he calls his team the Navy Seals. “They’re the best in the business. When they make calls, customers want to bank with us.”

For both customers and employers, technology is key to Cadence Bank’s success. For demanding corporate users, the bank offers sophisticated treasury management products that allow companies to send their receivables and payables straight to and from the bank; for retail users, the bank offers best-in-class mobile banking applications. But employees also benefit from the bank’s sophistication. “We have a great deal of automation for bankers so they can take care of business with their iPhones and Blackberries when they’re at their kids’ basketball game,” Murphy says.

The Cadence Bank formula is one that worked well for Murphy in the past, and thus far it’s eliciting a strong response. The bank now has $5.7 billion in assets, 1,400 employees, and 100 branches in six states. “I call it the southeast-conference strategy, which makes perfect sense with Texas A&M University coming into the Southeast Conference.”

Murphy says 2012 will be Cadence Bank’s best in terms of new-business generation. The bank still has $75 million of its initial $1 billion backing to invest, but Murphy is pausing before pursuing additional acquisitions. “We just finished the Encore Bank conversation in September, and it looks like we’ll be in a very challenged environment for several years, so we’re taking a breath,” he says. “We’ll probably start looking for more acquisitions in the first quarter of 2013.”