North American Financial Holdings Inc. May be Large Purchaser of Southern Banks

  
Jacksonville Business Journal - April 12, 2010
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A group of heavyweights in national banking circles could form a bank in Jacksonville by using more than $500 million in capital to buy up failed banks.

The group seeking to form a national bank charter in Jacksonville already has about $528 million in cash, and includes former top executives from Bank of America Corp., an adviser to GMAC LLC and NASA, a managing director at Morgan Stanley and a retired partner of Goldman Sachs & Co., according to the application filed with the Office of the Comptroller of the Currency, a national banking regulator.

The bank holding company, called North American Financial Holdings Inc., could eventually create a multibillion-dollar bank under the proposed name of NAFH National Bank, by acquiring multiple failed banks throughout the Southeast, analysts said.

“This group is experienced in building big banks and there are big bucks behind this group,” said Tony Plath, finance professor at the University of North Carolina at Charlotte.

The proposed board of directors and top executives of the company are mostly former Bank of America heavy-hitters such as Eugene Taylor, whose 38 years at the company included his most recent positions as vice chairman of Bank of America and president of Global Corporate and Investment Banking, and Bruce Singletary, who was senior risk manager of commercial banking for Bank of America’s Florida Bank during his 31 years with the company.

Taylor will be the chairman and CEO of the bank and company, and Singletary will be the chief risk officer, according to its application. Christopher Marshall, who will be the chief financial officer, was a senior adviser to GMAC LLC’s CEO in helping the company restructure, including leading the efforts to cut $1 billion in expenses to get the auto lender giant back on its feet. Marshall was also an adviser in banking sector investments for The Blackstone Group LP, chief financial officer for Fifth Third Bancorp and, before spending five years with Bank of America, he was an adviser to NASA and the chief financial officer of AlliedSignal Technical Services Corp.

None of the principals could be reached for comment.

While there have been reports of former bankers forming groups to buy failed banks, Plath said he had not seen a group of this caliber yet.

“This is far more horsepower than what you would typically see,” Plath said.

As of Dec. 22, the company had $528 million in cash capital. The application stated NAFH National Bank would form “to acquire certain assets and assume certain liabilities of one or more failed depository institutions.”

With half a billion in capital, “they could purchase a pretty good size bank or several smaller banks,” said Stan Smith, finance professor at the University of Central Florida. Smith said that amount of capital could allow them to buy a bank with $2 billion to $5 billion in assets.

The fact that NAFH is seeking a national charter with the Office of the Comptroller of the Currency means that it will be easier for the bank to branch out throughout the Southeast, Plath said. “This is a super regional franchise” that will “likely be in the tens of billions of dollars.”

The portions of the applications made public based on a Freedom of Information Act Request by The Business Journal do not indicate where the bank’s target markets are or where the holding company will be based. However, the Comptroller’s Web site, which listed the application, stated that the proposed corporate and mailing addresses were in Jacksonville at the time it was filed in January.

Analysts said it is likely the acquisitions will start in Florida and Georgia, where banking was historically lucrative and costly. But now those states carry a majority of the failed banks selling for cents on the dollar since the Federal Deposit Insurance Corp. typically covers most of the loan loss.

“Florida banking, for the long term, is going to be an excellent outlook,” said Linda Charity, director of the Division of Financial Institutions at the Florida Office of Financial Regulation.

Charity said she is seeing more interest in forming banks throughout the state. There is also a pending application with her office by a group of national bank veterans and former regulators to form a bank in Ponte Vedra called Bank of the Southeast, which will form to buy failed banks.

Another group primarily of veteran bankers who formed a private equity group, Bond Street Holdings LLC, raised $440 million last year. Bond Street, which bought two failed banks in Florida in January, was among the first private equity groups to acquire failed banks in this recession.

Charity said she is also seeing more experienced groups flush with cash seeking to acquire a failed bank or support a distressed one.

“A year ago people were kicking tires, but there was not enough backing,” she said. “Now, it’s a different time.”

Last May, three New York private equity firms including Fortress Investment Group LLC, where Eugene Taylor was an adviser, had an initial agreement to inject up to $150 million in equity into Boca Raton-based First Southern Bank, owned by First Southern Bancorp Inc. Had the deal gone through, Taylor would have been chairman and CEO of First Southern. But the bank announced in February that it raised $400 million in capital through 25 institutional investors, naming a different former bank president as chairman and CEO.

North American Financial Holdings must get the green light from three regulators before it can begin: the Office of the Comptroller of the Currency to form a national bank, the FDIC to insure deposits and the Federal Reserve to become a bank holding company. The application filed with the Office of the Comptroller is called a shelf charter, which means the regulators will not approve it until the company bids on a failed bank and it’s approved by the regulators.

It is clear that this kind of group and capital backing “puts them in a nice competitive position,” said Jack Greeley, a banking attorney at Smith MacKinnon PA in Orlando. “It’s done in a way that makes a regulatory-approved deal.”
— Rachel Witkowski -rwitkowski@bizjournals.com | 265-2219



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