The competition for failed banks in Florida is so intense that the private-equity financier Wilbur L. Ross Jr. went looking for greener pastures.

He found them in Michigan.

Less than a year after Ross led a team of investors to purchase the failed BankUnited in Coral Gables, Fla., the billionaire spearheaded a $200 million investment in the small but ambitious First Michigan Bancorp Inc. in Troy. The additional capital allowed the $100 million-asset company to buy the $900 million-asset CF Bancorp of Port Huron out of receivership.

In an interview last week, Ross said his decision to enter one of nation's most battered economic climates was based largely on the lower prices of banks there compared with other markets.

"In Florida, the pricing for a bank, even a failed bank, has gone up enormously. It is a very different market from what we encountered a year ago," Ross said. "In Michigan, there is more realistic pricing."

Now with a presence in the Midwest and the Southeast, Ross said he is seeking other acquisitions across the country, including the Southwest and the Pacific Northwest. He said his company, W.L. Ross & Co. LLC, is also scouting banks in the Northeast — where the market has remained pretty healthy.

"We are interested in creating a series of participations in a variety of regions," Ross said. "We've looked at 200 banks in the last couple of years, and there is no surprise that the vast majority have come up short. The hardest thing to find has been a decent management team."

Ross joined First Michigan's board in May, and is backing David T. Provost, a veteran Michigan banker who joined the flailing company in mid-2008. Provost sold Bloomfield Hills Bancorp Inc. in 2005 to PrivateBancorp Inc. of Chicago for three times its book value.

"With David, we have a fellow that knows how to build a bank in Michigan," Ross said.

Upon joining First Michigan, Provost had planned a second iteration of his private bank, focusing on the well-heeled Oakland County area. Yet with the acquisition of CF, the company will now focus on providing banking services to a more economically diverse marketplace.

First Michigan received as much as $400 million in capital commitments, Provost said, but only drew $200 million of that for the CF acquisition and additional opportunities in the state.

Nine banks in Michigan were undercapitalized as of March 31, according to data from Foresight Analytics, a unit of Trepp LLC. An additional five are only adequately capitalized. Yet First Michigan is not focused solely on banks in the state that are headed toward failure.

"We are interested in both assisted and unassisted deals that might come up," Provost said in an interview last week. "We think there are some very good banks in Michigan that can't raise capital and will need a good partner."

Ross also expects his company will be able to pick up failures in a less-crowded market. Many Michigan banks are hurting, he said, and out-of-state regional banks don't see a "strategic reason for them to need more exposure there."

This lack of rivals is likely to lead to better pricing on failed-bank deals.

"There has not been the level of interest to absorb banks that we've seen in other regions," said J. Brennan Ryan, a partner in Nelson Mullins Riley & Scarborough LLP, who represents First Michigan. "Most of the failures have been payouts."

That is a markedly different landscape than in Florida, where the bidding process has changed dramatically in the past year, Ross said.

In addition to competition from other investment groups, Ross said other banks have gained an appetite for failed banks in Florida. Ross refers to them as the "strategics," because as existing banks they can bid more aggressively given the synergies they could realize through an acquisition.

Ryan said a lack of interest from other banks likely made it easier for Ross' team to raise capital for First Michigan. "All you hear is stories about how Michigan is a disaster," Ryan said. "But there was a lot of [investor] interest, and I think it was because of the lack of competition and the good management team."

As chairman of International Automotive Components, a plastics business in Dearborn, Ross is quite familiar with the economic challenges in Michigan, which has been affected more by the severe auto industry downturn than by the real estate woes experienced across the country. And while he says the state's economy continues to struggle, he retains some hope about a recovery.

"People underestimate the resources there. They forget about the sheer engineering talent that exists because of its heritage," Ross said. "So even though it is struggling, it isn't going to go to zero."

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