First Home Bank is hitting its stride as a small-business lender in western Florida.
The Tampa bank, following a first quarter where it reported $4 million in income from selling Small Business Administration loans, went to investors seeking $8 million in capital. When the dust settled, the offering brought in $9.4 million, or 18% more than the target.
The windfall marks another important chapter in First Home’s resurgence. The $180 million-asset bank lost nearly $12 million from 2009 to 2012 before shifting its focus to SBA lending. Last year, First Home reported a profit of $4.6 million, fueled by $10 million in gains from loan sales.
The offering’s success also highlights how much the banking industry in Tampa, and much of Florida, has rebounded since the financial crisis. The city’s population has grown by 10% since 2010, to nearly 3.1 million; it is expected to increase by an additional 6% by 2022, according to the Tampa Hillsborough Economic Development Corp.
“It was a really compelling investment thesis,” Russ Hunt, CEO of Skyway Capital Markets, said of First Home’s offering. Skyway was the investment bank that handled the capital raise. “Tampa is extremely attractive, and management’s ability to execute on its national lending strategy produced an outsize return."
Anthony Leo, First Home’s CEO, declined to comment beyond a press release in which he touted a mix of “well-known” institutional investors and local shareholders.
Other banks in the Tampa Bay area have done well in recent years. Banks based in that market averaged net income of nearly $17 million last year, a major improvement from the $1.6 million average in 2011, based on data from the Federal Deposit Insurance Corp.
The area has also had a number of bank deals.
C1 Financial, which focused heavily on tech innovation, was bought last year by Bank of the Ozarks in a deal that valued C1 at 202% of its tangible book value. The $212 million-asset NorthStar Bank agreed in May to sell itself to the $4.8 billion-asset Seacoast Banking Corp. of Florida for 131% of its tangible book value.
Overall, six Florida banks have agreed to sell themselves this year at prices that value those sellers, on average, at 176% of tangible book value, based on data compiled by Keefe, Bruyette & Woods. Half of those deals involve out-of-state buyers.
Such activity helped First Home surmount a few notable obstacles, Hunt said. The bank’s relatively small asset size made it tougher to get looks from some investors, while the lack of an exchange listing raised some concerns about share liquidity.
Those who invested bought into “an exceptional management team, strong performance and a dynamic business model,” Hunt said.
First Home’s national SBA platform may have also set it apart from other small banks. During the SBA’s 2016 fiscal year, which ended on Sept. 30, the bank closed 660 loans totaling $177 million, barely placing outside the nation’s 20 biggest 7(a) lenders. So far this fiscal year, the bank is in the top 10.
The 7(a) program has surged in recent years as more lenders get into the business. Through July 7, the SBA had guaranteed $19 billion in 7(a) loans in fiscal 2017, and the program has the potential to surpass the $24.1 billion in loans backed in fiscal 2016.
The most recent entrant is HomeTrust Bancshares in Asheville, N.C., which announced on Tuesday that it had created an SBA lending program.
Small institutions that are not active SBA lenders should consider giving 7(a) a look, said Charles Green, a former bank CEO and vice president for business development at ReadyCap Lending in Atlanta. “The program is as robust as it’s ever been,” he said.
“If you’re under $1 billion of assets, it’s increasingly difficult to earn enough money to entice your shareholders to hold on to your stock,” Green said. SBA lending "is a very strong earnings opportunity and the government guarantee reduces your credit exposure.”