Bank consolidation in Florida is on a bit of a tear and perhaps no one is more surprised by it than one of the state's busiest dealmakers.
Paula Johannsen, a managing director at Monroe Financial Partners, has advised three Florida deals in the last month. In the depth of the downturn, Johannsen says she thought dealmaking in the Sunshine State would have a cloud over it for years.
"I was wrong," Johannsen says. "When things were bad I thought Florida was going to be tainted for a lot longer. It came back a lot sooner than I ever thought it would."
Further, Johannsen says she is struck by the diversity of transactions that are taking place, running "the gamut from something really healthy to banks that still have some scratches and dents."
Also noteworthy, says Chris Marinac, an analyst at FIG Partners, is the geographical diversity of recently announced deals. "Things started turning upward in Miami a few years ago and it has spread across the state," he says.
"The historical things have not changed. Florida still has favorable tax rates and snow birds," says Marinac, adding that the state's attraction might also be aided by improvements elsewhere in the country. Essentially, Florida benefits when home prices rise elsewhere because retirees can once again see a big payday on selling their home and moving to the state.
"You had this issue where people had a passion to relocate to the sun, but would have taken a bath on selling their house, so they didn't move," Marinac says. "The passion is still there."
Florida's most recent deal involves a seller with a fair share of dents. HCBF Holding in Fort Pierce, Fla., agreed last week to buy Highlands Independent Bancshares in Sebring, Fla. The $250 million-asset Highlands was short of capital goals set by a 2012 enforcement action that required it to have an 8% leverage ratio and 12% total risk-based capital ratio. Also, 6.43% of the bank's assets were nonperforming at Dec. 31.
The problem loans, while high, are contained, says Michael Brown Sr., chief executive of HCBF, Harbor Community's parent company. His attraction to the franchise was its low cost of deposits, which stood at 27 basis points at the end of last year. Buying a bank in Sebring also dovetails HCBF's agreement last month to buy the central Florida operations of Popular (BPOP).
"With the branch purchase in Orlando and this deal, we will have very attractive market penetration in central Florida," Brown says. The deals should also push HCBF, which was formed in 2010 with $330 million in capital, beyond $1 billion in assets, a mark that many in the industry regard as the minimum size needed to complete a successful public offering.
HCBF has no immediate plans to go public, but Brown says he is aware that it becomes a viable option once the company's hits $1 billion in assets. Prior to HCBF, Brown and his team ran Harbor Florida Bancshares, which sold to National City in 2006 for 3.24 times its tangible book value. (National City is now part of PNC Financial.)
"We will be better positioned size-wise," Brown says. "I'm not saying we will [pursue an IPO], but we will be at a size where it won't be a hindrance. Going public is not foreign to us, obviously."
Home Bancshares (HOMB) in Conway, Ark., is also eyeing central Florida. It agreed last month to buy Florida Traditions Bank in Dade City. The deal for the $312 million-asset bank is the first transaction for Home since last year's blockbuster deal to buy in-state rival Liberty Bancshares in Jonesboro.
John W. Allison, Home's chairman, had been on the hunt for Florida deals before the Liberty transaction and vowed to return. The Florida Traditions acquisition is notable because most of Home's Florida franchise was cobbled together with failed banks and other distressed situations. In this case, Home is paying Florida Traditions 157% of its tangible book value.
Florida Traditions Chief Executive Bud Stalnaker "runs a really good bank," Allison says. "The bad news is there is not as much cost-savings upside. He is already doing a 1% return on assets but we needed something between Orlando and Tampa and this fits in there perfectly."
Other recent deals for Florida banks include Valley National Bancorp's (VLY) pending purchase of 1st United Bancorp (FUBC); First American Bank's agreement to buy Bank of Coral Gables; and the Seacoast Banking Corp. of Florida's (SBCF) agreement to acquire BANKshares in Winter Park.