May 08--Fast-growing 1st United Bancorp will sell itself to a New Jersey bank for $312 million, an indication that the Florida banking market is returning to normal.
Boca Raton-based 1st United (Nasdaq: FUBC) said Thursday that it will become part of Valley National Bancorp (NYSE: VLY) of Wayne, N.J. Shares of 1st United jumped 9.3 percent to $7.99. Valley National was down to 2.9 percent to $9.48.
In a call with analysts, Valley National Chief Executive Gerald Lipkin said he was drawn by 1st United's growth and its rich base of no-interest deposits. Lipkin said he plans to broaden 1st United's focus beyond business loans.
"They don't do residential, they don't do auto lending," Lipkin said. "These are things that we're going to start to get rolling in that direction."
1st United's narrow niche helped it weather the Great Recession. The bank remained profitable and snapped up several failed institutions.
Headed by prominent banker Rudy Schupp, 1st United has 21 branches statewide. The sale comes as something of a surprise. 1st United had bought seven banks since 2008, and its assets jumped from $1 billion in 2009 to $1.8 billion in 2013. Deposits followed a similar path, and profits more than doubled from 2009 to 2013.
Schupp and two other 1st United executives, John Marino and Warren Orlando, will sign three-year contracts to stay with Valley National after the merger. They own about 2 percent each of 1st United's shares.
The $312 million price tag is large enough to rank as the largest U.S. bank deal this year, although Valley's stock dip after the deal was announced reduced the value to $305 million, according to SNL Financial. 1st United said it agreed to pay a "termination fee" of $14.5 million should the marriage sour.
Two class-action law firms seeking to represent disgruntled shareholders bashed the deal soon after it was announced. One firm, Andrews & Springer of Delaware, called the price "unfair" to 1st United shareholders.
Valley National Bank has $16 billion in assets and 204 branches in New York and New Jersey. 1st United has 21 branches statewide.
"It's a relatively small deal for Valley, but there's more growth potential in South Florida than there is in New Jersey," said Brady Gailey, an analyst at Keefe, Bruyette & Woods in Atlanta.
Bank mergers ground to a halt during the Great Recession, but deals have cranked up again as bankers elsewhere look to Florida for deposit growth.
During Thursday's call with analysts, Lipkin noted that 1st United pays no interest on fully 38 percent of its deposits. That might not be a great deal for depositors, but it's good for the bank's bottom line.
"They're able to take the money at zero cost and lend it out and make a spread of 4 or 5 percent," Gailey said.
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