First NBC Joins Crowded Field Vying for Florida Customers

Florida has enticed yet another out-of-state bank.

Florida has long been a draw for out-of-staters, with mixed results. Though a number of banks that entered the state were burned during the financial crisis, many others used the crisis to forge franchises out of failed banks. As the market has heated back up, some banks are again paying healthy premiums to buy into or expand in the state.

The $3.6 billion-asset First NBC Bank in New Orleans managed to find an affordable cost of entry, agreeing on Friday to buy the failed First National Bank of Crestview in the Florida Panhandle. First NBC didn't return a call for comment, but the company made it clear in a release announcing the deal that it has a greater interest in the state.

"The acquisition marks First NBC's entry into the Florida market, a market the board considers to be extremely attractive due to its size, significant tourism base and historical affiliation with the New Orleans market," Ashton Ryan Jr., the company's president and chief executive, said in the release. "First NBC expects to expand its newly acquired Florida footprint to the Florida Coast in the near future."

Though the company could be considered a latecomer to Florida's failed-bank game, analysts said the state has long been on the radar for Ryan and his management team. As a bank established in 2006, First NBC was likely preoccupied trying to build out its presence in its core markets when opportunities to buy failed banks were plentiful in the Sunshine State.

"They were working on establishing creditability with their private equity and other initial investors, and the business plan called for a big focus on building out locally," said Stephen Scouten, an analyst at Sandler O'Neill. "So a Florida move didn't fit into the story. Ryan talked about Florida, but we weren't really sure it would ever come to fruition."

"There could be more activity in the near term," Scouten said, taking into account First NBC's release. "I wouldn't be surprised if they did something more in Florida in that region soon."

Pricing has ticked up in Florida recently for traditional deals, and the company will likely face stiff competition. Suitors could include Home Bancshares in Conway, Ark., which trades at more than three times its tangible book value. First NBC, in comparison, trades at about 161% of its tangible book value.

The pool of drowning banks is drying up, too. At Sept. 30, there were five banks, including First National Bank of Crestview, that were undercapitalized, according to data from Monroe Financial Partners.

"Even though the bulk of the problem banks in Florida has been taken care of, there are still a handful reeling from the effects of the downturn and have not really been able to reverse the damage to their institution," said John Hargrave, a managing partner at DD&F Consulting, which provided operational assistance to First NBC on the acquisition.

Other industry observers said that First NBC doesn't necessarily need another acquisition in Florida because the company has proven itself to be adept at growing organically. For instance, the company grew loans nearly 5% organically during the third quarter. (The company has yet to report fourth-quarter results.)

"Maybe it becomes more of an organic move," said Kevin Fitzsimmons, an analyst at Hovde Group. "There's not a great urgency for another deal."

Besides the geographic expansion, analysts also said they liked the deal because the failed bank's $62 million in assets promises to bring some diversity to asset side of First NBC's balance sheet. The company's stock has been hit harshly in recent months, along with most banks that operate in states where energy is an economic driver.

"I don't know whether [energy prices] drove it or not, but it could have heightened their interest," Fitzsimmons said.

The deal could also give First NBC more core banking business and move it away from a reliance on its tax credit business. Though profitable, the benefits of the business show up in the tax line of its income statement and can make it a difficult story to understand, Scouten said. "The tax credits make their financials screwy … making for what I call a complexity discount to the stock," Scouten said. "So any buildup of the core bank is a positive."