BankAtlantic's Levan Touts an 'Elegant Solution' from Thrift Sale

Alan Levan, the chairman and chief executive of BankAtlantic Bancorp Inc., stated earlier this year that he was energized over his company's future. Turns out that the future involves an exit from banking.

On Tuesday, the $3.8 billion-asset company in Fort Lauderdale, Fla., said it would sell its banking operations to BB&T Corp. After the sale, BankAtlantic will be left with a mixture of $623.6 million of performing and nonperforming loans to work out and roughly $300 million of proceeds to contemplate its future.

"BB&T is able to acquire an extremely high-quality franchise with no criticized assets, while BankAtlantic Bancorp is able to keep those assets that we know like the back of our hand," Levan said in an interview Tuesday. "And we get to take them forward without the regulatory pressure of having to liquidate them. We can maximize the value and monetize the opportunity."

Investors appeared supportive of the new plan, with BankAtlantic’s common stock soaring to $7 a share on Tuesday morning, the highest the stock has been since July 2010. The stock finished Tuesday slightly above $5 a share, or more than double where it closed a day earlier.

While the company was touting plans to remain independent this summer and even bringing in new managers, Levan said BankAtlantic was also aware of the 10% deposit premium it fetched on the sale of its branches in Tampa to PNC Financial Services Group Inc. earlier this year.

That deal brought in $38.7 million, and, along with an $11.3 million rights offering, BankAtlantic returned to a positive equity position after moving into insolvency in the first quarter.

Still, BankAtlantic had high nonperforming assets and an obligation to pay its holders of its trust-preferred securities, including deferred interest that surpassed $35 million at June 30. Levan said the BB&T deal allows the company to become current with those debt obligations.

"The Tampa transaction with PNC set a high-water mark for us. It gave us the confidence to know that we had a really valuable franchise," Levan said. "And this deal presents an elegant solution. We get to come out on top. BB&T wins, the bancorp's shareholders win and our colleagues and customers win."

Levan would not say if the company solicited bids for the thrift, but he said that it chose BB&T and that the deal came together over the last few weeks.

"We handpicked BB&T because of its strong reputation as a community bank acquirer," Levan said. "Serious negotiations started a few weeks ago and we signed the agreement at 5:30 this morning for the 8 am announcement."

Levan said regulators did not force the deal. He added that while BankAtlantic's equity position has been a point of concern with regulators, the thrift had remained well capitalized and in compliance with regulatory requirement deadlines throughout the economic downturn.

Ken Thomas, an independent bank economist in Miami, said he believed the July elimination of the Office of Thrift Supervision may have been the tipping point for BankAtlantic, based on his conversations with other struggling thrifts. The company now has reports to Office of the Comptroller of the Currency and the Federal Reserve.

"I think Dodd-Frank is what pushed this. When Levan lost the OTS, he probably wanted out," Thomas said. "I don't think he wanted to be under the Fed. This was the game changer."

Levan said the regulator change was not a factor and described his relationship with the OCC and the Fed as "nothing but positive and professional." Still, he said Dodd-Frank certainly didn't encourage him to stick it out.

"The amount of new regulation that a smaller community bank has to deal with is literally overwhelming," Levan said.

Should the deal close, the company said in a press release that it would select a new name and focus on commercial lending and specialty finance. Industry observers said they were not surprised that the company is desirous to reinvent itself. During better years, it owned brokerage firm Ryan Beck & Co., a home builder, and a master-planned community developer.

Still, the 67-year-old Levan is not ruling out a return to banking altogether. "I love the banking business. We prospered in the banking arena for a very long time," he said. "I don't see any reason why we wouldn't return."

Levan had his share of turbulence since 2007. Between late 2007 and early 2011, BankAtlantic lost nearly $580 million. In 2008, the company filed a lawsuit against analyst Richard Bove, who wrote that BankAtlantic was in trouble. (The sides reached a settlement last year.)

BankAtlantic also fought a class-action lawsuit from investors over statements Levan made about the loan book. After losing out initially, a lower court verdict against the company was tossed out by a federal judge in April.

Thomas said the deal was good news for Florida, but bad news for any buyer hoping to break the Florida market in a big way.

"This is a good deal for south Florida. We didn't want another private-equity bank here. It is better to have a well-run bank own here, than someone who is going to sell in a few years," Thomas said. "But this was the last chunk of good branches left in the state that can move market share."

Thomas said the deal would move BB&T from the 12th-largest holder of deposits in Broward, Miami-Dade and Palm Beach counties to the sixth position.

Chris Marinac, an analyst at FIG Partners LLC, said he hopes it is evidence of some improvement in the battered Florida economy.

"Clearly there is enough recovery in south Florida that warranted a heavy 9% deposit premium by BB&T," Marinac said in an email. "We feel this area was the first to drop into the abyss and therefore is one of the first to recover."