Florida Deal Combines 'Old' and 'New' in Orlando
A number of de novo banks, or those that are seven years old or younger, are facing long delays from regulators when it comes to amending their business plans to allow for bigger growth targets.August 30
As expiration dates near for FDIC loss-sharing agreements inked in 2008, more failed bank buyers are looking to unload loans before the coverage runs out. As a result, they face growing pressure to book new loans to replace the ones they are trying to run off.August 10
The latest bank merger in Florida proves that you can combine something old with something new.
The something old is Old Florida Bancshares, an Orlando company that had been willing to pass on buying banks in recent years to focus mostly on organic growth. On the opposite end of the spectrum is New Traditions National Bank, a $455 million-asset bank that agreed on Monday to sell to Old Florida.
New Traditions truly embodies the spirit behind its name, having celebrated its four-year anniversary in August.
Buying the de novo bank made sense to the $624 million-asset Old Florida because of New Tradition's shared focus on organic growth, says John Burden, Old Florida's president. The seller's "loan book is pristine and they have some of the best loan officers and deposit gathers in town," he adds.
Old Florida will pay $45 million in stock for its smaller rival in a deal that cements the buyer's position as the biggest community bank in Orlando based on June deposit market share data from the Federal Deposit Insurance Corp. The deal will also put Old Florida above $1 billion in assets, reaching a target that many bankers believe is necessary to remain profitable against regulatory costs.
"Both boards are realistic as to how important scale is today," says Burden, who joined Old Florida during its $58 million recapitalization in 2009. "From a community perspective, we really need to have a really large community bank just concentrated in Orlando."
Since 2009, Old Florida has tripled in size, to nine branches. It agreed last month to buy a branch from Orange Bank of Florida in a deal that Burden says should be completed in January. Old Florida would add three more branches after it buy New Traditions; that acquisition should close late next year.
New Traditions, which is profitable, will operate as a separate unit of Old Florida, keeping its existing management and all of its directors. The bank's loan portfolio grew 40% from a year earlier, totaling $248.5 million at Sept. 30.
Old Florida has entertained whole bank acquisitions for some time, Burden says. The only company it has bought since the recapitalization was Mercantile Capital, a U.S. Small Business Administration commercial lender. Rather, management has looked to hire loan officers to attract business from large and midsize banks.
Total loans at Old Florida rose 15% from a year earlier, to $444 million at Sept. 30. "Our growth has been from hiring teams of people from other banks who are just calling on people and letting them know we have money to lend," Burden says.
"Our first option has always been organic growth in the long run," he adds. "In Orlando, there are a lot more opportunities in the organic side. I know I'm the only one saying that here but it's the truth."
New Traditions had its own reasons to sell, says David Dotherow, the company’s president and chief executive.
“We’ve had tremendous success but we felt in order to increase our presence and brand, we needed to make sure we partnered up” with another growing bank, Dotherow says. “On a larger scale, it really meets the needs of small- to medium-sized businesses that need lending help right now.”
New Traditions wasn’t shopping itself to many buyers, and it ended up choosing Old Florida because both management teams had known each other for a long time. “If we were going to partner up with somebody, why not partner up with someone we knew,” says Dotherow, who attended the same high school as Burden.