Harbor Florida Vets Have Strong Hand in Weak Market

Three and a half years after selling Harbor Florida Bancshares Inc. at the top of the market, the company's former executives have decided it's time to buy.

The team, now known as HCBF Holding Co. Inc., last week announced a deal for the $97 million-asset First Bank and Trust Co. of Indiantown.

It is unclear how much the group — headed by Michael Brown Sr., its chairman and chief executive — has raised in capital or how much it is paying for First Bank and Trust, but analysts said it is likely an enviable bargain compared with the 3.24 times tangible book value that National City Corp. paid in late 2006 for the $3.2 billion-asset Harbor.

"Mike's most brilliant move was knowing when to sell," said Richard Bove, an analyst at Rochdale Securities. "This could be a classic case of getting out at the top and getting back in at the bottom."

Though Brown said it's too soon to lay out his battle plan, he is clearly looking to expand.

"Our intentions are to grow the bank," Brown said in an interview Monday. "We are going to look at it three ways. We will look to grow organically, we will look for opportunities with the government and we will look at working with banks that are trying to raise capital."

Analysts said Brown is in the opportunistic position of tilling his home turf, a market that has been deeply affected by the residential real estate bust and the resulting disruption of the banking industry there. Among other changes, Brown's toughest competitors no longer exist.

Analysts praised Brown and his team for their success at Harbor, a converted mutual that had a history of solid organic growth, strong returns on equity and a robust capital base.

"Harbor was one of the great institutions that I covered. They always operated with a lot of capital, earnings were always good," said Richard Weiss, an analyst with Janney Montgomery Scott. "If they can recreate the Harbor magic then it could really be something."

Analysts said that although Brown is considering all three strategies, organic growth will likely be a priority.

"He has all the old relationships from building Harbor," Bove said. "Developers are hurting and loan demand might be slow right now, but they remember the glory days of working with Harbor and they are going to go to him when that market picks back up."

The disruption in this region is likely to help in their quest for market share. Among the big banks in the area were National City and Wachovia Corp., both of which changed hands after the financial meltdown in 2008. The $3.4 billion-asset Riverside National Bank in Fort Pierce, one of Harbor's fiercest rivals, failed in April. The Federal Deposit Insurance Corp. sold its assets to TD Bank of Wilmington, Del., a unit of Toronto-Dominion Bank.

"Will customers want to go where decisions are made locally or up in Toronto or San Francisco?" Weiss said. "Brown probably feels confident in their ability to take business away from others."

The only remaining community banking competitor of note in the market is Seacoast Banking Corp. of Florida in Stuart. Though the $2.2 billion-asset company has managed to raise enough capital to survive, Bove said it has been distracted by credit-quality issues.

Weiss said that if Harbor had remained independent it would have been among the survivors yet may have been deeply wounded by credit-quality problems.

Harbor's portfolio, Bove added, likely was not a major factor in National City's demise, though the amount the company paid for Harbor certainly didn't help. At $1.1 billion, the deal was considered expensive, and several analysts called the price a concern when the deal was announced in July 2006. Days later, National City announced it also was buying Fidelity Bankshares Inc. of West Palm Beach for $1 billion.

First Bank of Indiantown, meanwhile, is profitable, well capitalized and has only minor credit blemishes, said Karen Dorway, the CEO of BauerFinancial Inc., a rating firm in Coral Gables, Fla. "It looks solid given the environment," she said.

Though Brown mentioned possible failed-bank purchases, analysts said those are unlikely given their diminishing attractiveness. "There are not a whole lot of options left, and everyone wants into Florida," Weiss said.

Further, analysts are skeptical that Brown's team will turn out to be big acquirers of operating banks, even if some are selling at a steep discount. "He built his bank over time," Bove said. "He may have sang the song that he wanted to make acquisitions, but he never did."

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