Florida Market Has Room for the Cautious and the Bold

By Trigaux, Robert | American Banker, July 31, 1997 | Go to article overview

Florida Market Has Room for the Cautious and the Bold


Trigaux, Robert, American Banker


Florida's banking market remains widely perceived as one of more coveted by many of the nation's financial institutions. But this year, the state's mergers and acquisitions scene has become an incremental game of chess for some institutions and Russian roulette for others.

For market leader Barnett Banks Inc. in Jacksonville, the last major banking company based in Florida, its in-state M&A strategy is defensive - focused on maintaining its status as the No. 1 bank by deposit share, ahead of First Union Corp. That's why Barnett aggressively bid $160 million for - and won - the $1.1-billion Florida franchise left behind in June by the departing First of America Bank of Kalamazoo, Mich.

Losing its lead position in Florida would be one of the greatest blows to the high-flying value of the Barnett franchise.

"Because Barnett feels pressure from First Union, it's back making acquisitions again," said Richard Bove, an analyst with Raymond James & Associates.

Two acquisitions this year by Barnett have closed. But a third announced deal, estimated at $400-million, for Miami's Republic Banking Corp. fell through in May after it became clear Barnett could suffer a greater-than usual defection of the Hispanic bank's customers. And, in a swap, Barnett in May traded some of its branches in Georgia with SouthTrust Bank, picking up five offices in Florida.

Barnett will do more in-state deals, at top prices, if it is necessary.

"Barnett," Mr. Bove said, "is loath to give up its top ranking in the state."

The retreat by First of America, which first entered Florida in a 1994 government acquisition of the failed Goldome Savings Bank franchise, is the latest indicator that some Midwest banks are rethinking their "follow the retiree customer to Florida" concept.

One result of the Midwest retreat, like that of Ohio's FirstMerit Bank, is that the few dominant banks already entrenched in Florida have been better able to consolidate their holdings.

The top three banks in market share - Barnett, First Union and NationsBank - continue to make selective acquisitions in the state. But First Union's main focus is now in the Middle Atlantic region, while NationsBank is looking to strengthen its new presence in the Midwest.

Together with No. 4 SunTrust Banks, the top four banks now control more than 75% of the state's deposits.

If some out-of-state banks are rethinking their Florida moves, Alabama institutions are not.

While several Alabama banks launched major M&A assaults in Florida several years ago, this year saw a latecomer with an aggressive agenda. Midsize, Montgomery-based Colonial BancGroup this year has completed or announced nine acquisitions in Florida of banks ranging in size from $80 million to nearly $250 million.

Colonial CEO Robert Lowder, recognizing a strong Florida stake is a proven way to boost Wall Street's opinion of Alabama banks, has publicized a lofty goal. He wants $5 billion of assets under Colonial's belt within the next two to four years. So far, Colonial is up to $1.7-billion in Florida assets.

"We're just getting cranked," said Charlie Brinkley, Colonial's chief in Florida and the former head of Colonial's first acquisition in the state, Orlando's $240-million-asset Southern Bank.

But as other acquisition-minded banks are learning this year, expansion in Florida won't come cheap. When Mr. Lowder first approached Southern Bank, Mr. Brinkley said his bank was not for sale. Then Mr. Lowder pulled out his checkbook, analysts recall, and said, "What will it take? …

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