EverBank has thrived as one of the most profitable banks in Florida by becoming a dominant player in the online banking realm.
Last week, though, the Jacksonville company made a detour into brick-and-mortar banking by acquiring three failed Bank of Florida franchises, snapping up 13 branches across the state and increasing its assets by 15%, to $11 billion.
Robert Clements, EverBank Financial Corp.'s chairman and chief executive, says the move — though it may appear unusual for an Internet-centric bank — is part of a strategy to dive further into private banking and wealth management services.
Well-heeled Bank of Florida customers are among its target audience.
"There is not a change in our focus," Clements said in an interview Thursday.
While online banking may be a successful strategy, analysts say it's costly because online customers tend to move around in search of higher deposit rates. And that's why they think purchasing the Bank of Florida offices can help EverBank remain profitable.
"With branches, they can compete on convenience," said Ken Thomas, an economist and independent bank consultant in Miami. "They can lower their cost of funds and the regulators will like it."
The online banking model is "fraught with problems," he added. Regulators consider many of the deposits "hot money" because customers chase the best rates.
EverBank's customers are predominantly high-net-worth depositors that the company has attracted on the strength of its reputation for delivering highly competitive online rates and services.
Private banking, meanwhile, has picked up steam as wealthy investors consider the safety and soundness of an institution even more important than the returns provided. That's another reason that EverBank is going after Florida customers.
Private banking "has been a cash cow for most bank institutions in good standing," said Carlos J. Arboleda, executive director of the banking and financial services group at Stephen James Associates in Fort Lauderdale. "EverBank does have the wherewithal to attract" that base.
Thomas said it is also likely that EverBank will lower its online deposit rates so they match those offered at its new branches.
EverBank opened four branches in Jacksonville as a test of the brick-and-mortar strategy in 2006. But it has not expanded branches elsewhere since.
The Bank of Florida purchase will give EverBank a presence in several affluent markets in the state, in the Fort Lauderdale, Naples and Tampa areas.
The deal provided EverBank with an 18% boost in deposits, to $8.7 billion, based on March 31 data.
EverBank's decision to bid on banks with branches in multiple counties in Florida rather than many in one prime area did raise some eyebrows.
Thomas calls it a "shotgun strategy," in which banks tend to pick up only a small percentage of market share in each area. And "profitability is generally driven by market share," he said.
But Clements, who said EverBank considered dozens of Federal Deposit Insurance Corp.-assisted deals in the past several months, said part of the lure of the Bank of Florida is that its low branch density holds down operating costs.
Meanwhile, EverBank faces the challenge of redirecting its online marketing strategy to reach customers who bank at branches.
The company recently announced a marketing campaign after its February purchase of Tygris Commercial Finance Group Inc., an equipment leasing company based in New Jersey.
That deal included $535 million in capital, bolstering EverBank's capital base, giving it the ability to make deals like the one for the Bank of Florida affiliates.
EverBank's bank unit had a 19.06% total risk-based capital ratio as of March 31. Historically, that would have been considered too high by investors looking to put that capital to use to generate returns. Yet those perceptions have changed lately.
Based on EverBank's capital position and standing with regulators, Arboleda said, "I'm sure the FDIC approached EverBank and said: 'It's a good time for you to take advantage' " of the bargain deals in Florida.
Clements would not confirm that.
Before the financial crisis, it was common for Florida bank acquisitions to reach three to four times book value. But with failures mounting, the FDIC-assisted deals have helped to push prices lower.
In the Bank of Florida deal, EverBank assumed all of the deposits and branches, and purchased most of the assets. The FDIC agreed to cover about 80% of the loss, which has been typical in most loss-share agreements this year.
Clements said EverBank remains interested in acquiring failed and operating banks in Florida and the Southeast. The company will consider deals elsewhere, too.
The capital "has allowed us to consummate this acquisition … and it leaves us with substantial capital going forward to pursue acquisitions like this," he said.