Bank M&A in Florida has been like a roller coaster for the last few years, but the most exciting rides are costing buyers a little bit more.
Iberiabank in Lafayette, La., on Monday agreed to buy Old Florida Bancshares in Orlando for $259 million, or 185% of the seller's tangible book value.
For Iberiabank, the deal marks a bit of a tilt toward acquisitions of healthy banks in the Sunshine State. Previously, the $15.5 billion-asset company had seemed content to cobble together a franchise by capitalizing off the financial crisis, buying four failed banks and an another institution that had lingering issues.
Iberiabank also agreed earlier this month to buy Florida Bank Group, a company in Tampa that had recently returned to profitability.
"It is way more fun to buy someone who is thriving in the current economy than struggling," Daryl Byrd, Iberiabank's president and chief executive, said in an interview after announcing the latest deal. "We're expecting a lot of opportunity to grow with this transaction in central Florida."
Old Florida, recapitalized in 2009 when it had just $206 million in assets, has also been an acquirer. It now has nearly $1.4 billion in assets.
A key component of Old Florida's attractiveness is its specialty lines of business. The company offers equipment finance, with a $78 million portfolio that is primarily in Florida and Georgia and is concentrated in logging and excavation equipment.
Old Florida also owns Mercantile Capital, which focuses on making loans backed the U.S. Small Business Administration's 504 program. Old Florida bought Mercantile in 2010 after the seller's attempts to become a bank failed.
Byrd, during a conference call with analysts, said he is keen to leverage those businesses across Iberiabank's operations.
"We're really not in either of these businesses currently, and frankly I'm very excited to learn the businesses," Byrd said, adding that the SBA business dovetails with Iberiabank's small-business lending efforts.
Equipment finance, however, is a totally new business for Byrd. "In the equipment leasing business, I think we understand the business in terms of the industries they are in," he said. "But we're not in the business, so we're excited to see what the synergies are."
The deal also expands Iberiabank's operations geographically. Orlando is the one major Florida market where Iberiabank lacked a presence. Old Florida is the eighth-largest deposit holder - and largest community bank - in the Orlando area.
The market is growing, too. Deposits around Orlando increased 8% in the second quarter, compared to a year earlier, according to data from the Federal Deposit Insurance Corp. Old Florida's deposits in the market increased 4% over that time.
"There's a lot more opportunity here because we can take share and grow with the market," John R. Davis, Iberiabank's director of financial strategy, said in an interview. "Most of the markets aren't growing at that pace."
That helps rationalize the deal metrics, analysts said. Iberiabank is forecasting that the deal would boost earnings projections by 2% in 2016 and 3% the following year. Management said it should take less than four years to earn back the deal's 2% dilution of tangible book value.
"I'd characterize this deal as a little pricey, but there's scarcity value," said Michael Rose, an analyst at Raymond James. "There's a limited pool of banks with more than $1 billion in assets in Florida. Iberia has clearly made investments in Florida to capture growth, and the growth has been pretty good."
Iberiabank already has experience in building out markets. The company is often praised for its ability to increase market share organically after establishing a beachhead. For instance, the company bought First Private Holdings in Dallas earlier this year and, during its third-quarter call, Byrd was touting the results thus far.
Dallas was among Iberiabank's five best-performing markets during the third quarter, Byrd said. "The Dallas market outperformed our initial expectations and produced solid loan expansion during the quarter at an annualized growth rate of 29%," he said.