Beach Community buying First City in Florida through bankruptcy process

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Beach Community Bank in Fort Walton Beach, Fla., has agreed to buy First City Bank of Florida.

Florida First City Banks in Fort Walton Beach, which agreed to sell its $146 million-asset bank to Beach Community, filed for bankruptcy protection on Jan. 15. The transaction is expected to close in the second quarter.

The $491 million-asset Beach Community is familiar with the process. It emerged from bankruptcy in 2018 after an investor group infused $100 million into the bank.

The plan is to buy First City for $100,000 and raise $20 million to recapitalize the bank, said Chip Reeves, Beach Community's president and CEO. He said the acquisition would make Beach Community the biggest community bank headquartered in northwest Florida.

Reeves said one of the main attractions is First City's "sticky" deposit base, including a cost of deposits that stands at around 47 basis points. Beach Community's non-interest-bearing demand deposit accounts will go from 11% of total deposits 18 months ago to about 21% after the deal closes.

On the lending side, Reeves said Beach Community's performing loan portfolio increased by 30% in 2019 from a year earlier.

The bank is looking to make commercial loans a bigger part of its portfolio. C&I lending increased from a quarter of total loans a year earlier to roughly a third at the end of 2019. The bank made strides by hiring commercial lenders from Synovus Financial, Regions Financial and Valley Bancorp.

A sale to Beach Community is a positive outcome for First City, which struggled in the wake of the last recession and the Deepwater Horizon oil spill, said John McGee, the bank's chairman and CEO. McGee will not be joining Beach Community.

Bob Bennett, First City's president and chief operating officer, will join Beach Community as its Okaloosa County market executive.

Carl Chaney, Beach Community's executive chairman and a former CEO at Hancock Holding, said this is likely the first of many M&A deals for the company. The bank is interested in expanding into Tampa and the central Florida.

"Less than 18 months ago, Beach Community was virtually on the brink of being closed by the regulators," Chaney said. "This is the first step, with many more to come, on our path to be a multibillion-dollar Florida business bank."

Chaney said Florida has very few banks with assets of $1 billion to $5 billion.

Hovde Group, Smith McKinnon and Nelson Mullins advised Beach Community. Gerrish Smith Tuck advised Florida First City Banks.

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Community banking M&A Commercial lending Bankruptcy Florida