North American Financial Holdings agreed Wednesday to buy a 99% stake in TIB Financial Corp. for $175 million. TIB Financial, which has about $1.7 billion in assets and 28 branches across south Florida, is the parent of TIB Bank and Naples Capital Advisors. The deal, which still needs regulatory approval, is slated to close in third quarter.
NAFH is a “blind pool” that raised $900 million with the intent to invest in troubled financial institutions. Crestview Partners was lead investor. Other NAFH investors include Falfurrias Capital Partners, which was founded by former Bank of America CEO Hugh McColl and BofA CFO Marc Oken.
NAFH has been looking for a bank deal since finishing its capital raise in December, Oken says. TIB Financial is its first acquisition and Oken expects they will do more. “There is a lot of opportunity out there,” he says.
Still, there have been few private equity-backed bank deals this year despite that fact that there are more than 700 banks on the FDIC’s troubled bank list.
So how did NAFH succeeed? NAFH was one of the few blind pools that got done in 2009, one private equity executive said. The blind pool structure, for a short time, alleviated FDIC’s concerns about private equity deals, because no investor owns more than 9.9%. “By early 2010, the FDIC decided they didn’t like [blind pools] so no more were done,” the source said.
Also, NAFH is a known entity to reguators. Many of NAFH’s executives come from Bank of America. Gene Taylor, NAFH’s CEO, is a former BofA vice chairman. NAFH also invested in a failing bank that the FDIC would’ve needed to resolve. TIB reported first quarter losses of $5.7 million.
Oken says that private equity investments have lagged, because bank deals require much capital. “You can’t leverage a bank as much as you can a company,” he says.
Bank mergers raise regulatory risks that PE firms are traditionally not used to, he says. Also, buyout shops don’t have people with bank experience needed to complete a deal and run the business. “NAFH is unique,” he says. “Just about everyone came from BofA.”
Officials for Falfurrias declined comment. NAFH could not be reached for comment.