South Financial Group Inc. reported its fourth straight quarterly loss, but its chief executive said it is willing and able to make small, government-assisted deals.
The $18.8 billion-asset Greenville, S.C., company is working to address lingering exposure to the ailing Florida residential market brought on by aggressive growth in recent years. Nevertheless, H. Lynn Harton, its interim CEO, said it has been approached by the Federal Deposit Insurance Corp. to bid on several deals for failed institutions, though it has not completed any.
In an interview Thursday, Mr. Harton said South Financial ideally would bid for the branches and deposits of banks with $250 million to $300 million of assets. Anything bigger than $500 million in assets would be too distracting, since South Financial is working through its own credit issues, he said. "It would make much more sense to do a couple of bite-sized deals," Mr. Harton said.
Though South Financial recorded a full-year loss of $568.6 million, analysts said regulators may be using financial triage as they address failures. They are "looking at the larger, stronger banks first, but they also need to look at the next level of banks" as possible acquirers for "very small institutions," said Kevin Fitzsimmons, an analyst at Sandler O'Neill and Partners LP.
Andrew Gray, director of public affairs for FDIC, said it casts " a fairly wide net — sometimes asking as much as 400 institutions to bid" on a small one. The FDIC carefully vets an acquirer's ability to absorb a failed bank's operations, he said.
On Dec. 31, South Financial had a Tier 1 capital ratio of 12.86%, a total risk-based capital ratio of 14.35%, and a tangible common equity ratio of 6.05%. The equity ratio is expected to rise to 7.84% after the May 1 conversion of certain convertible preferred shares. Though some analysts say the company needs to be more aggressive working through credit issues, Andy Stapp of B. Riley & Co. Inc., said it could absorb "a small acquisition."
