Longtime Midwest banker Marty Adams is heading south on a rescue mission.
The struggling TIB Financial Corp. in Naples, Fla., announced late Friday that Adams, former chief executive of Sky Financial Group, would join TIB to help it secure the $150 million it needs for a recapitalization.
Upon successful completion of the effort, Adams would ascend to the helm of TIB, which has been besieged by credit woes yet holds considerable franchise value.
Bank experts said bringing on a new management team can greatly increase the chances of success for a capital-raising effort — particularly in markets like Florida where dozens of banks are clamoring for capital and judicious investors are weighing their options.
"For a bank that has gotten into trouble, even if the culprit is the overall economy, a new management team is viewed positively," said Charles Crowley, managing director at Stifel, Nicolaus & Co. Inc. "It becomes an easier story to tell investors if there is new blood."
That help can be amplified if the new team is made up of notable, experienced bankers.
"Big names can provide a certain amount of comfort to investors, particularly to those private-equity firms that are just beginning to invest in banking," said Wesley A. Brown, managing partner of St. Charles Capital, an investment banking firm based in Denver.
TIB said it struck up the relationship with Adams and his team months ago. Talks evolved from Adams being a mere investor to an agreement that he would run the company, said Stephen Gilhooly, executive vice president and chief financial officer of the $1.7 billion-asset TIB. "We feel that having more experienced leadership is going to be more attractive to private-equity and other institutional investors," Gilhooly said in an interview Monday. "He grew his bank from a few hundred million to $18 billion. His proven track record is attractive."
Joining Adams will be Kevin T. Thompson, former chief financial officer of Sky, and John S. Loeber, a bank consultant. After the capital has been raised, Thompson would become chief financial officer and Loeber would become chief credit officer. Gilhooly said he expects to remain with the company, though his position has yet to be defined.
Adams gained attention for his expansion of Sky Financial Group over 20 years. Sky was sold to Huntington Bancshares Inc. in 2007 for $3.6 billion, or two times its book value.
Adams' record has some blemishes, though. Huntington's acquisition of Sky was plagued by a massive loan made to Franklin Credit, a New Jersey subprime lender. Still, Adams' ability to expand and sell companies would be attractive to private-equity firms, said Terry McEvoy, an analyst with Oppenheimer & Co. "He is still a well-known name among bank investors as someone who knows how to build and knows what the words 'exit strategy' mean," he said.
TIB announced in April that Patriot Financial Partners, a private-equity firm in Philadelphia, had agreed to invest up to $25 million in TIB with a significant string attached — that the company must raise a total of $150 million.
Gilhooly said the additional capital is expected to come from other private-equity firms and institutional investors.
Despite widespread credit problems, the Sunshine State has become a focal point for bank investors because of its long-term growth prospects. Interest has become so intense that it has driven up the cost of failed-bank deals and has sent some investors, most notably the billionaire financier Wilbur L. Ross, looking outside the state for their next opportunities.
Though interest in Florida institutions remains red-hot, Gilhooly said, making a deal happen is a painstakingly long process. "It takes a lot of time to turn interest into commitments," he said.
Should TIB succeed in raising an additional $125 million, it would boost its total risk-based capital ratios to the high teens, Gilhooly said, based on March 31 data, when the bank's total risk-based capital was 8.1%. In July 2009 the bank was ordered to boost its leverage ratio to 8% and its total risk-based capital ratio to 12% by Dec. 31, 2009 as part of a memorandum of understanding with regulators.
When asked if the management change was driven by regulators, Gilhooly said the current order has no such requirement. He would not say if the bank was facing additional scrutiny.
Gilhooly said TIB would be well positioned for growth with the fresh capital, but acknowledged that dealing with credit problems is the paramount concern. "We still have a very full plate of nonperforming assets," he said, noting that nonperformers made up 5.5% of total assets as of March 31.
On the other side of the credit issues, Gilhooly said, is a world of opportunity. Besides acquisitions of open banks and failed-bank deals brokered by the Federal Deposit Insurance Corp., Gilhooly said TIB could benefit from being one of a few remaining large community banks in its market.
Yet clouding all these efforts are the possible effects the oil spill in the Gulf of Mexico could have on the already fragile economy of Florida's west coast.
"The oil spill is very much on investors' minds. Is it coming to Naples? What effect is it going to have on Fort Myers?" said Christopher Marinac, an analyst at FIG Partners LLC in Atlanta. "We aren't sure, but a threat is all it takes to spook investors."