The recent trend toward bank IPOs, coming three years into a de facto industry lockdown, may prove ephemeral.
When Circle Bancorp in California filed for an initial public offering in October, soon followed by Florida's EverBank Financial Corp. and BankUnited Inc., it was, if not a substantive pickup, at least a noticeable one in capital-raising. Two other banking companies had gone public during the past three years, according to SNL Financial.
But observers are betting the change is not permanent; investment bankers predict it could be years before such activity registers as meaningful again.
"You will not see many public offerings for quite a while," until after-tax profitability returns and devaluation of assets ends, said Ben Bishop, the chairman of the Florida investment bank Allen C. Ewing & Co.
"My goodness, that won't happen for at least two years," he said.
Analysts said those three companies could attempt offerings now because, unlike many others, they are well-capitalized and thus in a position to grow. The less a company needs capital, the more likely investors are to give it to them, the analysts said.
These "special stories can come out to the market at any time," said Brett Rabatin, an analyst at Sterne, Agee & Leach Inc. "When it is obvious you have to have capital, it will not be available to you."
EverBank in Jacksonville and BankUnited in Miami Lakes have ample capital and had been widely expected for some time to go public.
In the case of BankUnited, its Oct. 29 filing came as no surprise considering the $945 million in funding it got last year from private investor groups. The company has grown significantly since private investors bought the failed BankUnited in May 2009.
The IPO "seems to be just an opportunity for investors to monetize some of their investment" in BankUnited, said Mark Muth, an analyst at Howe Barnes Hoefer & Arnett Inc.
BankUnited plans to raise up to $300 million in the offering "to grow opportunistically, both organically and through acquisitions," according to its registration statement with the Securities and Exchange Commission.
The $11.2 billion-asset BankUnited was exceedingly well capitalized, with a total risk-based capital ratio of 42.47%, at June 30.
EverBank's case is different because it has longtime shareholders, many of whom have been with the company for more than a decade, who key on liquidity, Bishop said.
EverBank's shareholder equity has nearly doubled, to $934.4 million at June 30, compared to a year earlier, largely due to the purchase of a specialty lender this year that added more than $470 million in capital.
The $11.2 billion-asset EverBank plans to raise up to $200 million in its IPO filed Oct. 8.
Representatives of EverBank and BankUnited declined to comment, citing the quiet periods leading up to each institution's offering.
How the IPOs are timed and priced will influence others flirting with a public offering, analysts said.
The public market is still flush with investors skeptical about the financial sector. Though all three companies said they are raising capital for further growth, selling that story is difficult for any bank.
A bank "could have sold stock on the phone in 2006, prerecession," Bishop said. "Today, you've got to have a story to tell."
EverBank and BankUnited have given proof that they have a story, through both failed-bank and traditional acquisitions in the past year.
But the $307.6 million-asset Circle Bancorp indicated in its Oct. 4 registration filing that its 20-branch growth strategy for San Francisco will not include government-assisted deals, and this could dampen investor enthusiasm for its IPO.
Rabatin said investors still prefer banks that target acquisitions through the FDIC. Because of this, healthy banks in sick states like Florida and Illinois can have more success pitching their stories than banks in areas of fewer failures such as California, Texas and the Pacific Northwest.
Rabatin pointed to the fortuitous timing of the only completed IPO so far this year, First Interstate BancSystem Inc.'s raising of $153.3 million in March.
At the time, Rabatin said people thought there would be more FDIC-assisted deals in the Pacific Northwest, playing into the Billings, Mont., company's growth strategy.
Since then, "the FDIC's game up there has completely dried out," Rabatin said.
Lyle R. Knight, First Interstate's president and chief executive, agreed there has been a dearth of failed-bank deals in his core markets, although there should be other growth opportunities, particularly as regulatory reform takes hold.
"A lot of banks will exit the business rather than deal with the costs of the regulatory environment, and that should create opportunities for banks like First Interstate," Knight said.
Patience is also necessary for those who file now, given the experience of First Interstate since it sold 11.5 million shares at $14.50 each.
First Interstate's stock price peaked at $17.05 within a month of the offering — but hit a 52-week low of $11.07 on Aug. 31. Late Wednesday, the stock traded at $14.02 a share.
"Most companies that do IPOs like First Interstate BancSystem are long-term planners and have a long-term vision so the current price is not as relevant as the future price," Knight said. "So the current price is not as relevant as the future price."
Circle Bancorp is the only one among the three recent filers to estimate that its stock will have an initial price of $10 per share.
The company is majority-owned by one investor, another potential reason for it to want to go public, said Dan Bass, a managing director at FBR Capital Markets.
"All of these IPOs are unique, but at least it tells you the markets are open," Bass said, "and as long as the prices are not too high, investors may be interested."