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Shares of Herald National Bank rose more than 25% Tuesday after Bloomberg reported that BankUnited in Miami Lakes, Fla., was in talks to acquire the small, New York-based commercial bank.
May 31 -
John Kanas pulled off a stunning turnaround. But as it turns out, he's just getting started. The longtime New York banker intends to bring BankUnited to his hometown.
May 1 -
When Wall Street investors opened their wallets wide to BankUnited Inc., they were sending a message to other capital-hungry community banks. It just was not the message that those banks were hoping for.
February 3
If New York bankers are worried about the return of John A. Kanas, they can take consolation in this: He can't go head to head with them for more than a year.
A noncompete agreement with Capital One Financial Corp., the company Kanas left in 2007, prevents him from doing business in the New York market until August 2012. So even after his current employer, BankUnited Inc. of Miami Lakes, Fla., closes its $71.4 million purchase of Herald National Bank in New York in the fourth quarter, Kanas will to remain hands-off for a while.
"We will leave the institution alone and independent" in the short term, Kanas said Thursday.
In the long term, Big Apple incumbents have good reason to fret. The deal would give BankUnited a platform to fight for commercial loans, something Kanas excelled at when he ran North Fork Bancorp. Kanas "has historically made acquisitions in New York, he knows the market, he knows the people and he knows how to compete in New York," said Bob Ramsey, an analyst FBR Capital Markets & Co. "I think that makes him a threat."
Kanas, who has been BankUnited's chairman, president and chief executive since May 2009, has always made it clear he would try to copy the commercial banking growth of North Fork.
He helped take that retail-oriented bank from $1.4 billion in assets in 1996 into a $36 billion-asset regional powerhouse by the time it was sold to Capital One in 2006. North Fork's share of the New York market grew from 0.38% to 4.85% over that time, according to the Federal Deposit Insurance Corp. Kanas pulled it off in part by buying prime locations in the city and with acquisitions such as the 2004 purchase of GreenPoint Financial Corp.
The landscape in New York is different today from the 1990s. At North Fork, which was a relative newcomer, Kanas "had the luxury of pickpocketing off the big boys" like Bank of America Corp., said Anthony Polini, an analyst at Raymond James. "In some respects, it may not be as easy [now], but I think there's plenty of room for a new business bank."
Kanas acknowledged that New York has changed. "Our approach will be slightly different than North Fork," he said. "When we started rebuilding North Fork, it had a different customer base." North Fork's accounts were savings accounts largely built up by more than a dozen acquisitions, mostly of thrifts, that were converted to look more like a commercial bank. Kanas said BankUnited will focus more on expanding its commercial business than on branching. "Our intention is to build a commercial bank [and] to employ fewer branches with an emphasis on commercial business," he said.
BankUnited plans to consolidate at least one of Herald's three branches while emphasizing its Manhattan branch. The company plans to open four to six branches in Manhattan next year.
"It is hard to predict [the pace of expansion] because we see growth in two ways. One is strategic through acquisitions and other is organic," Kanas said. "We have not set a line in the sand to get big by this date."
Kanas said BankUnited is looking at other acquisition targets in Florida and will do the same in New York. Herald would be Kanas' second purchase of a bank run by Herald's chairman and CEO, Raymond Nielsen. (He was the CEO of Reliance Bancorp of Garden City, N.Y., which North Fork bought in 2000.)
Ramsey said Kanas is well respected by community bankers in New York because of his strong ties to the area. So he may not encounter the same level of competitive resentment as he did from some Florida bankers when BankUnited launched an advertising campaign to poach commercial loan officers in late 2009.
Others have shown commercial loan growth is attainable, even in the fiercely competitive New York market. "Look at what Signature Bank is doing … they keep adding teams [of loan officers] and there appears to be double-digit organic growth rate for that company now," Polini said. "That's a good sign for BankUnited or any relatively new bank to take more market share"
The acquisition of a virtual de novo bank "certainly helps [BankUnited] build presence in this market," Polini said. "It also helps them realize synergies for another acquisition further down the road when more banks actually start considering exit strategies."
