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The $1.7 billion-asset company announced late Tuesday that North American Financial Holdings Inc., led by former Bank of America Corp. executive Eugene Taylor, would invest $175 million in the company so that it can shore up its undercapitalized bank unit.
June 29 -
Capital Bank Financial, a Miami company formed two years ago to buy distressed banks in the Southeast, has struck a deal to acquire Southern Community Financial (SCMF) in Winston-Salem, N.C., for $48.4 million.
March 27 -
Capital Bank Financial, a $7.7 billion-asset privately held bank holding company, said Monday it would raise about $250 million via an initial public offering the company first announced in June 2011.
September 10 -
Capital Bank Financial (CBF) in Miami said its board had authorized the repurchase of up to $50 million of its common stock, which could take place through open-market or through private transactions.
February 6
Gene Taylor put on a clinic in investor relations Monday.
The head of Capital Bank Financial (CBF) in Coral Gables, Fla., knows shareholders must be getting restless. The private-equity-backed company was built to buy other banks, but it hasn't done a deal in more than a year after having made eight in the previous two years.
Other would-be acquirers who are mired in a similar lull and there are plenty of them might want to borrow from Taylor's two-part call for investor patience at a financial services conference in New York hosted by Barclays.
Step No. 1: try to show them you are making good use of your down time.
Capital Bank has been shrinking its balance sheet, writing off bad loans and getting rid of "dormant and unprofitable" deposits, explained Taylor, the president and chief executive. Though total loans fell 1% at June 30 compared with March 31, the $7 billion-asset Capital increased originations by 20% in the second quarter, according to his presentation, entitled "The Path to Performance."
Step No. 2: make it clear you remember the original mission.
Management remains focused on finalizing an acquisition by year end, Taylor and one of his colleagues said.
"You can't be a growth bank unless you build your assets," said Christopher Marshall, Capital's chief financial officer. "We've been operating our bank with far too much capital. We fully expect to execute on additional acquisitions that meet the criteria of the previous banks we have bought."
Capital, backed by Crestview Partners and other private-equity players and
"We are in discussions with multiple banks," Marshall said, adding that he'd be "disappointed" if Capital failed to announce a deal by the end of this year.
"We've been actively looking," Marshall added. "We know the space very well and we know the banks that we want to buy. The Southeast is still a target- rich environment and there are dozens of banks that have to do something."
Taylor underscored that point. "You can assume that we have had conversations with anything that trades. There is no shortage of targets."
Capital is also finding the acquisition game less crowded now, in terms of aspiring consolidators, compared with 2011, executives said. The company is just having a hard time finding attractive banks that are ready to sell, Marshall said. "As the 2014 outlook becomes clearer, boards might be more willing to bite the bullet and get some things done," he said.
Balance sheet management is often viewed as more mundane than bank acquisitions, but Capital's management team said efforts to purge assets and deposits will also help it achieve its goal of having a 1% return on assets. Its ratio stands at 0.64% and trails behind other Southeastern banks such as BankUnited (BKU), Trustmark (TRMK) and United Bankshares (UBSI).
Much of that cleanup is a result of the earlier acquisitions. Capital bought distressed banks that had high concentrations of commercial real estate loans and often paid the highest deposit rates in their markets. Commercial real estate now makes up less than 30% of total loans compared with 42% of the portfolio at its peak.
Capital is spending upwards of $50 million annually to manage its $854 million portfolio of criticized and classified assets, Marshall said. Management has been cleaning out an average of $100 million in distressed assets each quarter, including $133 million in the second quarter, which puts it on pace to eliminate those assets within two years.
About 80% of those annual costs, or roughly $40 million, should "be permanently eliminated," Marshall said, which would boost annual earnings per share by 40 cents.
Another big reason for Capital's lagging return on assets, as well as tangible common equity, is its stockpile of capital, executives said. The company
While acquisitions are a priority, management said they are also in discussions about
