Florida real estate is remarkably cheap right now, and so is the state's biggest deal this year.
1st United Bancorp Inc.'s
But the $37 million price tag is paltry compared with what banks in similar shape in California, New Jersey and Florida have gone for this year.
There are two main curbs on Anderen's selling price. A dismal local property scene is hurting profit at the $205 million-asset company, and a glut of failures has depressed valuations for healthy banks.
Anderen's two unsuccessful attempts to sell itself in recent years further weighed on its value.
Its deal to merge with Florida Bank Group Inc. of Tampa
1st United, of Boca Raton, Fla., and Anderen expect to close their deal in the first half of 2012, pending approvals from regulators and Anderen's shareholders.
Anderen is being sold for a relative bargain compared with recent sales of other small banks with similar levels of problematic loans.
1st United would pay a price equivalent to about 95% of its tangible book. In June, Opus Bank
BCB Bancorp.
1st United expects to lose money on about 4% to 7% of Anderen's outstanding loans, or $6 million to $10 million.
That is lower than loan markdowns of 12% or more common in purchases of other banks with lots of commercial real estate in the past year.
Anderen has a decent balance sheet and relatively high capital levels. About 3.6% of its assets are nonperforming, which is slightly high but not out of line for a regional bank with a heavy amount of business property loans.
So why is it fetching less than those other banks?
The first reason relates to profit. Anderen — which had earnings of about $500,000 in the first half of the year — is less profitable. Its returns on equity are lower than the two other banks.
The less money a bank earns, the lower the price because a buyer needs to be able to earn back what it pays in a reasonable amount of time.
In this case, 1st United expects to earn back what it is paying for Anderen in less than three years, an amount of time acceptable to investors.
Sometimes scarcity value can drive up a deal price, especially in coveted markets such as Texas. But Anderen does not have much scarcity value; a steady pace of failures in Florida has given would-be buyers ample opportunity to bulk up without having to buy a healthy bank.
Stifel Nicolaus & Co. advised 1st United in the deal. Sandler O'Neill & Partners advised Anderen.