A day after reiterating its interest in doing deals in Florida, North Carolina, and the Georgia coast, South Financial Group Inc. followed through.
The $13 billion-asset Greenville, S.C., company announced late Wednesday that it was buying the $429 million-asset Pointe Financial Corp. of Boca Raton, Fla.
Pointe Financial’s 10 branches, which serve small and midsize businesses and individuals in southern Florida, would give South Financial $316 million of deposits and $276 million in loans.
The deal is expected to close in the second quarter. South Financial said 43% of its deposits would then be in Florida, where it would move up two notches in market share, to No. 14.
Mack I. Whittle Jr., South Financial’s president and chief executive, said southern Florida is one of the “best banking markets in the country.”
The company would pay $24.5 million in cash and issue 2.5 million common shares. Wednesday’s closing price of $31.70 for its stock made the deal worth $101.5 million, the company said.
“We have been very disciplined and very specific about our acquisition strategy. We normally don’t overpay,” Mr. Whittle said.
Underlying South Financial’s publicly stated target of 30% annual asset growth is a plan to generate half of that from loan growth and half from acquisitions. It has bought six banks in the Sunshine State since 2002, including two this July, CNB Florida Bancshares Inc. and Florida Banks Inc., for $155 million and $168 million, respectively. Both are in the central part of the state.
Some analysts say the Pointe Financial deal looks expensive when measured by the earnings assumptions South Financial offered (it expects the purchase to add $5.9 million to profit in 2006, $6.6 million in 2007). They poinvted out, however, that Pointe would bring capital, technology, commercial lending in the market, and fee products.
“This transaction is one piece in the mosaic, and the mosaic is creating a large, metro-focused Florida franchise,” said Jeff Davis an analyst with First Horizon National Corp.’s FTN Midwest Research in Nashville. “The pricing a little rich, but no one has ever bought a cheap bank in Florida.”
Christopher Marinac, an analyst with FIG Partners LLC in Atlanta, said Pointe Financial was one of the few community banks that emphasized Dade County, Miami’s home — especially in commercial lending.
“Palm Beach and Broward [counties] always got more attention,” Mr. Marinac said. “Pointe thrived on that.”
South Financial has no operations in Dade County, and Mr. Marinac wondered whether it was “getting stretched a little bit thin in Florida.”
John Kline, an analyst with Sandler O’Neill & Partners LP in New York, said buying Pointe Financial would make South Financial a desirable acquisition target. But he and other analysts said it probably would not be bought soon.
Mr. Davis at FTN said the Pointe deal “makes it very clear that the strategy is to build the franchise.” Anyone trying to buy South Financial now would have to be at an exorbitant price, he said.
Still, several other banking companies — including SunTrust Banks Inc., BB&T Corp., and Royal Bank of Canada — have said they want to buy in Florida and might be interested in South Financial, Mr. Davis said. “There would never be any shortage of suitors.”
Mr. Whittle said Thursday that he would never automatically say no to a potential buyer, but that South Financial has a goal of 15% per-share earnings growth each year for the next three years.
Executive vice president Tim Schools said Tuesday in an interview with American Banker that South Financial plans to remain independent for at least five to 10 years.
The company said it would take merger charges of $6.3 million when the purchase is completed. The agreement includes a breakup fee of $3.5 million.
Mr. Whittle said Pointe Financial’s management team would be retained. South Financial’s shares fell 4.1% on Thursday.
