The courtship of Conway-based Home BancShares and Stonegate Bank of Pompano Beach, Fla., ended last week with a ceremony Monday after stock markets closed.
Home BancShares, which owns Centennial Bank branches in Arkansas, Florida, Alabama and New York, announced the purchase of Stonegate Bank at a news conference in Little Rock.
"We've been dancing around [Stonegate] for two or three years," John Allison, Home BancShares' chairman, said in a conference call last week. "We've had our eyes on it for several years, and they've had their eyes on us."
Stonegate's "high quality balance sheet, above peer profitability and attractive metro Florida [locations]" made it subject to acquisition rumors for several years, Matt Olney, a banking analyst in Little Rock with Stephens Inc., said in a research brief.
It was Home BancShares' biggest and most expensive transaction. Stonegate has $3.1 billion in assets and will push Home BancShares to $13.5 billion in assets when the deal closes this fall. Home BancShares will pay about $778 million or 2.4 times book value, one of the priciest bank purchases of this year.
The only other purchase Home BancShares made for a bank with more than $1 billion in assets was Liberty Bancshares of Jonesboro in 2013, which had $2.8 billion in assets.
"This was the coup, to get Stonegate under Home BancShares' wings," Allison said. "If they hadn't felt that their shareholders were being put in strong hands, it would not have sold."
Dave Seleski, Stonegate's chief executive officer, agreed.
"If you look at the universe of banks, you think, 'Are we better off with our stock or their stock?'" Seleski said. "In eight out of 10 cases, you couldn't say that. You have to do what's best for your shareholders."
Allison and other Home BancShares representatives visited Seleski in September. And Seleski made the decision to go with Home BancShares in January, Allison said.
Allison, who called Stonegate the best bank in Florida, acknowledged that the final price "was more than I wanted to pay."
"But it wasn't as much as Dave wanted," Allison said, adding that "there are a few big banks left," but their asset quality isn't good.
"[Stonegate's] asset quality is better than ours, and you know how superb our asset quality is," Allison said.
Home BancShares said Thursday that it will raise $300 million in a public offering to help with the cost of acquiring Stonegate.
Home BancShares "paid top dollar" for Stonegate, said Garland Binns, a Little Rock banking attorney.
In the 23 bank purchases made nationally in January, the average price paid was 1.63 times book value, Binns said. In the 14 purchases made in February, the average price paid was 1.81 times book value, Binns said.
"We've been known in the past for buying dent and scratch type [banks]," Allison said. "You'd have to fix them up a little bit and fix them up again."
The price Home BancShares paid for Stonegate was fair, said Randy Dennis, president of DD&F Consulting Group, a bank consulting firm based in Little Rock.
"I don't think it's an unreasonable price at all," Dennis said. "It works. It's [profitable] for them. Stonegate got a good price, but I think they also got a great stock with Home's stock."
Part of the purchase deal is Stonegate Bank's Cuban connection.
Stonegate was the first U.S. bank given permission to support MasterCard credit card use in Cuba, Bloomberg News reported. The agreement allows visiting cardholders, such as U.S. tourists or workers, to use the credit cards for some transactions.
No other U.S. bank has entered a banking relationship with Banco Internacional de Comercio as Stonegate did in 2015, according to the Sun Sentinel, a daily newspaper in south Florida.
It's uncertain whether the connection to Cuba will provide much business for Home BancShares, Binns said.
"I think that would have to be a wait-and-see deal," Binns said.
Stonegate is a great acquisition for Home BancShares, Dennis said. It's an aggregator bank, one that was started to grow on acquisitions, Dennis said.
"Stonegate was capitalized by a number of private equity [investor] groups," Dennis said.
Most of those investor groups were invested in Stonegate for a certain period of time, Dennis said.
"Their money is not money that stays [invested] in the bank forever," Dennis said. "It's not like [typical investments] in a community bank."
Most of those investors in Stonegate had held them for about five years and were ready to liquefy their investments, Dennis said.
Stonegate grew by purchasing four failed banks between 2009 to 2011 and by purchasing five healthy banks from 2011 to 2017, Olney said.
Stonegate gives Home BancShares a bigger presence in Florida, with northeast Florida the only unserved section of the state, Dennis said.
Home BancShares has 68 branches in Florida and Stonegate has 25 branches.
Stonegate provides depth to Home BancShares' Florida locations with a significant presence in southeast Florida, including the Miami-Fort Lauderdale metropolitan area, Brian Martin, a banking analyst with FIG Partners, said in a research report last week.
Stonegate also has offices in Naples, Sarasota, Tampa and St. Petersburg, Martin said.
SundayMonday Business on 04/02/2017