Bank acquirers are taking a hard look at the Gulf Coast

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Houston and New Orleans get a lot of attention, but Tampa, Fla., is quickly becoming one of the Gulf Coast’s most sought-after banking markets.

That, in turn, has led to a lot of consolidation.

More than half a dozen banks around Tampa Bay have changed hands in recent years, including Jefferson Bank, which sold to HCBF Holding in 2017. CenterState Banks then agreed to buy HCBF a few months later. An investor group recently formed West Florida Banking as part of a plan to buy the $122 million-asset Flagship Community Bank in Clearwater.

There is growing scarcity value in the market, said West Florida CEO Robert McGivney.

“That’s what makes the premium worthwhile for a bank that’s established,” he said of the 14-year-old Flagship. “We felt like we could bring a team that would energize it.”

Consolidation has been a major theme in Tampa, which had $85 billion in deposits in mid-2018, based on data compiled by the Federal Deposit Insurance Corp. Only three local banks remain in Pinellas County for instance, including Flagship, the $409 million-asset First Home Bank and the $300 million-asset Freedom Bank.

“It’s an economy that’s really taking hold on both sides of the bay,” said Russ Hunt, CEO at Skyway Capital Markets in Tampa. “The market is one of the best in the state if not the country."

Hunt pointed to Water Street Tampa, a $3 billion development project that will continue beyond 2019. While such activity will spur more acquirers to enter the market, Hunt said there are few sellers left.

“I can’t remember when we’ve had this few banks on the west coast of Florida," Hunt said.

Carl Chaney, chairman of the $471 million-asset Beach Community Bank in Fort Walton Beach, Fla., said his bank has gradually been moving executives to Tampa, Beach Community recently opened a commercial banking office there. He said Tampa is “exploding” economically while also seeing major disruption that has left a void of community banks.

“We love the Tampa market,” Chaney added.

With the number of sellers dwindling, some acquirer might turn their attention to the I-75 corridor between Sarasota and Naples, which Hunt and Chaney both cited as a growth opportunity for banks,

Beach Community has no branches south of Tampa, but Chaney said Florida'a west coast is enticing.

Beach Community also operates along the Florida panhandle, a region that Chaney said is driven by tourism and a big military presence. Among the most attractive markets in that part of the Gulf is Pensacola, which has a nice deposit mix and a strong small business community.

Pensacola “is not as driven by tourism as much of the panhandle is — but it has more commercial business,” Chaney said.

McGivney envisions Flagship growing to $300 million in assets in the next two or three years,a dding that the effort could be aided by fallout from the BB&T-SunTrust merger. Flagship, which is looking to add branches, is on the look out for divestitures tied to the mega-merger.

The big banks' customers, by and large, are not “in the strata” that Flagship will operate in, McGivney said. Flagship tends to focus on small businesses and mature midsize companies with ample capital and borrowing needs that are small enough for the bank to handle.

Disruption from M&A was a big reason why Hancock Whitney grew from $3 billion in assets to $23 billion while Chaney was its chief financial officer and co-CEO. He said the same is likely for banks that compete against BB&T and SunTrust.

“There’s a tremendous amount of overlap and a bunch of that is in our backyard,” he said. “We’re already seeing the results of that disruption.”

Of course, the Gulf is more than just Florida.

Houston, by far the biggest city along with Gulf Coast, has seen a flurry of consolidation since bouncing back from Hurricane Harvey in August 2017. Bankers are still looking at the city's banks as potential acquisition targets.

Scott Dueser, chairman and CEO of First Financial Bankshares in Abilene, Texas, said during a recent conference that his bank was scouting targets around Houston.

Alabama also presents opportunities.

Scott Latham, president and CEO of the Alabama Bankers Association, said the overall lending climate is strong in Alabama’s portion of the Gulf, with commercial real estate, residential development and construction lending seeing an uptick — particularly in the eastern shores areas of Baldwin County and in portions of Mobile and Saraland.

As companies expand and new businesses relocated to the area, the need for equipment financing will also increase, Latham said. With indications earlier this week about a potential decrease in interest rates, more companies are toying with the notion of taking out loans.

“The Gulf Coast area is prime for commercial banking, including existing banks with a presence here as well as institutions new to these markets,” Latham said.

Robert Taylor, CEO of the Louisiana Bankers Association, said the state is probably more dependent on trade that many other Gulf markets due to its ports, so it is watching the talks with China closely.

"I expect significant negative impacts should the trade issues linger," he said.

Still, Louisiana remains primarily an energy-producing state with employment in those areas, especially oil, dependent on the price per barrel. Oil prices have been heading downward recently, providing a reason for bankers to pay more attention to energy-related borrowers.

"The upside is the economy is more diversified than in previous energy downturns," Taylor said.

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