Is Fidelity Bankshares Inc. in play?
The West Palm Beach, Fla., thrift company's share price hit a 52-week high on Nov. 22 after Keefe, Bruyette & Woods Inc. again put the $3.9 billion-asset Fidelity on its list of prime acquisition candidates and other research analysts followed up with reports about the takeover speculation.
The stock retreated Monday, closing at $31.25, but is up nearly $6 a share since mid-October.
The company is mum on any would-be deal. In an interview last Wednesday, chairman and chief executive Vince A. Elhilow said Fidelity has a longstanding policy not to discuss possible merger activity.
Some analysts say there would be no shortage of suitors. They say companies that are looking to beef up in Florida and would love to get their hands on Fidelity include BB&T Corp. of Winston-Salem, N.C., Fifth Third Bancorp of Cincinnati, and Regions Bancorp of Birmingham, Ala.
Samuel Caldwell, an analyst in Keefe Bruyette's Atlanta office, said the likeliest buyers of Fidelity would be BB&T and Colonial Bancshares of Montgomery, Ala.
BB&T's 92 Florida branches include three in affluent Palm Beach County, where Fidelity has most of its branches. BB&T just ended its self-imposed moratorium on bank acquisitions after buying Republic Bancshares of St. Petersburg, Fla., two years ago. Mr. Caldwell says that BB&T wants to buy more in Florida and that Fidelity is the right size. BB&T would not comment.
Colonial's 160 Florida branches include 15 in Palm Beach County, and the company has bought three Florida banks in the past two years.
Fifth Third Bank has 86 branches in Florida, including four in Palm Beach County. Regions has 20 branches in the Miami area but none in Palm Beach County. Both companies declined to comment.
The parent of 53-year-old Fidelity Federal Bank and Trust is the third-largest independent bank or thrift remaining in Florida. Some analysts say that Fidelity's board wants it to remain independent, and that given the company's potential that would be smart.
Fidelity first surfaced on Keefe Bruyette's hot-prospects list in June. Mr. Caldwell gave three reasons Fidelity was considered in the investment banking boutique's latest update: "They've past their three-year anniversary of their mutual thrift conversion, so they're now allowed to sell, they're a very attractive franchise, and the CEO is 64 - the team just doesn't seem to be interested in running the bank too much longer."
Steven C. DeLaney, an analyst at BankAtlantic Bancorp Inc.'s Ryan Beck & Co. Inc. in Atlanta, agreed that Fidelity could be bought in the near future.
"They have the most attractive bank of any size left in Florida, and so a buyer may offer them a deal they won't be able to refuse," Mr. DeLaney said.
Fidelity has 48 branches in one of the nation's best deposit markets, nearly $3 billion of loans, and impeccable credit quality. Mr. Delaney said if it did sell, it could get at least 3.5 times tangible book, with a 20% price-to-deposit ratio.
Fidelity Federal Bank and Trust is No. 3 in deposits in Palm Beach County, with an 8.6% share. Population in the county north of Miami is expected to grow 13.5% in the next five years, versus 9.2% for all of southeast Florida. Moreover, 76% of the company's deposits were core deposits at Sept. 30, much higher than most of Florida's other thrifts, Mr. DeLaney said.
Fidelity earned 34% more in 2004 than it did in 2003, and through the first nine months its net income was up nearly 30% over the year-earlier period, to $25.3 million.
"I don't think Fidelity's management and board of directors want to sell the company at this time, and there's no reason for them to sell," said Albert Savastano, an analyst at Janney Montgomery Scott LLC in New York. "They should be able to achieve double-digit earnings growth over the long term." Mr. Savastano downgraded Fidelity to "neutral" from "buy" Monday, citing the run up in its stock price.
Mark Muth, an analyst at First Horizon National Corp.'s FTN Midwest Research Securities Corp. in Nashville, said takeover rumors are common before long weekends, when companies and their investment bankers have been known to hole themselves up and work out deals. Mr. Muth said he does not believe its board is ready to sell.
Other targets on Keefe Bruyette's list include CVB Financial Corp. in Ontario, Calif.; Heritage Commerce Corp. in San Jose, Calif.; South Financial Group in Greenville, S.C.; and First Oak Brook Bancshares Inc. in Illinois.
Four companies Keefe Bruyette pegged as targets in June have agreed to be sold.
