NEW YORK (The Deal) -- The state of Florida has seen a rise in the number of bank deals in recent months, bringing the total number of bank transactions to 22 so far since the beginning of 2014, according to on industry watcher.
There is already noticeable deal activity in the state, and heightened levels should continue, said Jeff K. Davis, managing director at Mercer Capital.
Such activity will continue as the state plays "catch-up" after several years of low deal volume, Davis said.
Deals are finally happening because "you've got sellers who may have had a near-death experience following the financial crisis," he said.
Bank boards are worn out, and now that pricing has recovered significantly from where it was three years ago, they are "willing to pull the trigger," Davis said.
Florida bank valuations were hit particularly hard, as lending there is a real estate-focused market. The property market in Florida has picked up significantly with many banks cleaning up their balance sheets and reducing their problem assets.
Such trends will continue to fuel higher valuations and acquisition interest by both in-state banks and out-of-state banks, Davis said.
There were 198 bank charters in Florida at the end of 2013, and there are just 175 now, according to Federal Deposit Insurance Corp. data.
However, the total number of assets in the state has increased to $165 billion from $147 billion during the same period.
Management teams rode out the downturn in an effort to fetch better valuations, while buyers who weren't interested in acquiring and turning around problematic banks wanted to wait until they resolved their issues, David said.
Valley National Chief Executive Gerald H. Lipkin said that he sees Florida as an expanding market, with the population "growing at a rate of 750 people a day."
At the end of last year, Florida passed New York to become the nation's third most populated state, according to the U.S. Census Bureau.
Lipkin said he expects the growth to continue.
The state also has "a very progressive tax structure with zero income tax" and a corporate business tax that is 40% lower than it is in New Jersey, where Valley National has its headquarters, he said.
The unemployment rate in Florida is low and continuing to drop, Lipkin said.
The jobless rate in Florida stands at 5.6%, while the rate was 6.5% for New Jersey and 5.7% for New York at the end of April, according to the U.S. Bureau of Labor Statistics.
Growth in New Jersey and New York is less robust than it is in Florida for Valley National, Lipkin said, so he is looking for more acquisitions.
He is most interested in markets south of Orlando.
In addition to CNLBancshares, the bank acquired Boca Raton, Fla.-based 1st United Bancorp in May 2014 for $313 million.
Valley National isn't alone in shopping for targets in Florida.
Birmingham, Ala.-based National Commerce "will likely be much more active in terms of acquisitions" in the state, Davis said.
Tupelo, Miss.-based Renasant (RNST) - Get Report will also be a likely consolidator in the state and continue to make fill-in acquisitions around the Florida markets of Albany, Ga.-based Heritage Financial Group, which Renasant acquired in December for $254 million, he said.
Florida markets such as Miami and its surrounding counties, Naples, Orlando and Tampa are the most desirable for banks, he said.
The bank acquired Palm Beach Lakes, Fla.-based Grand Bank & Trust of Florida for $16.2 million in March. Another potential takeover candidate is private Bank of Tampa with $1.2 billion in assets.
Those and other banks will be the beneficiaries of the changing scene in Florida. Before the financial crisis, new banks were common in the state.
Management teams would sell a bank, then use the proceeds to start another bank, with the intention of selling it when it reached an attractive size.
But new capital requirements and continuing low interest rates make it harder to run smaller banks, Davis said.
Consequently, fewer institutions are entering the market. As consolidation rolls on, valuations will only increase as the supply of targets dwindles.
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