CenterState Banks in Winter Haven, Fla., may be outgrowing its home state.
The $6.8 billion-asset CenterState is finding it increasingly challenging to find suitable bank deals in Florida, John Corbett, the company’s president and CEO, said during a conference call to discuss two new acquisitions.
The number of “attractive” targets is falling, Corbett said, adding that he expects more banks to sell between now and when his company completes the purchases of HCBF Holding and Sunshine Bancorp early next year.
As “the pickings get slim” in Florida, Corbett said, his team will be more willing to pursue opportunities elsewhere. Atlanta, where CenterState runs its mortgage business, would make sense but only after the company evaluates any available banks in Tampa, Jacksonville and Orlando, he said.
Corbett’s observations punctuate just how active acquirers have been in Florida, where 22 banks have agreed to sell since early 2016, based on data from Keefe, Bruyette & Woods and S&P Global Market Intelligence.
CenterState, which is responsible for four of those deals, will surpass $10 billion in assets after buying HCBF and Sunshine, creating a need to keep adding scale to offset the impact of increased regulation. The company said it expects to lose $6.5 million in annual earnings after crossing the regulatory threshold.
Smaller deals will also provide less of a boost as CenterState gets bigger, said John Rodis, an analyst at FIG Partners. At the same time, acquisitions in Florida will continue to give CenterState a chance to cut costs by closing overlapping operations.
Florida M&A should remain brisk as other institutions comb over the state for deals. On the other hand, CenterState is taking out two banks that had been active acquirers in recent years.
HCBF, formed by banking veteran Michael Brown Sr., had made a number of post-crisis acquisitions, including its July purchase of Jefferson Bancshares. Sunshine has also been a buyer, closing on the acquisition of FBC Bancorp last fall.
Banks willing to buy institutions with $500 million or less in assets are going away, said Paula Johannsen, a managing director at Monroe Financial Partners.
As for CenterState, the company has “the ability to grow organically” simply by executing in its existing markets, Johannsen said.
That view was shared by Corbett during Monday’s conference call.
“We don’t feel like we’re going to live and die by M&A,” Corbett said. “We’re just following the same disciplines we’ve always followed.”
By reaching $10 billion in assets, CenterState has also put itself “on the map” for aspiring buyers that want a bigger piece of Florida, Johannsen said.
While he didn’t discuss the potential of selling during Monday's call, Corbett recently discussed his commitment to targeting deposit growth in CenterState’s core markets, which cover most of coastal Florida.
“If we can keep doubling down on the markets that we’re in and get that average branch size up to $75 million, $80 million [in deposits], it creates a more stable annuity stream of earnings where you don’t have to take on as much risk on the loan size,” Corbett said during a recent conference call to discuss quarterly results. “That’s how we think about … our current footprint. That’s our preference.”