FCB Financial Holdings IPO Should Be Avoided

Jul.29.14 | About: FCB Financial (FCB)

Summary

FCB, the bank holding company behind 54-branch Florida Community Bank, plans to raise $222.2 million in its upcoming IPO.

Given very stiff competition from BAC, JPM, WFC, and others, we suggest investors consider holding off.

While FCB has achieved impressive growth through its aggressive acquisition strategy, and boasts strong management, investors could be loathe to invest in a financial institution following the recession.

FCB Financial Holdings, Inc (Pending:FCB), the bank holding company behind 54-branch Florida Community Bank, plans to raise $222.2 million in its upcoming IPO.

The Weston, Florida-based firm will offer 8.7 million shares, including 50% insider shares, at an expected price range of $24-$27 per share. If the IPO hits the midpoint of that range at $25.50 per share, FCB will command a market value of $1.1 billion.

Filing, Underwriting

FCB filed on June 20, 2014.

Lead Underwriters: BofA Merrill Lynch; Deutsche Bank Securities Inc; J.P. Morgan Securities LLC

Underwriters: Guggenheim Securities, LLC; Hovde Group, LLC; Keefe, Bruyette & Woods, Inc; UBS Investment Bank

Summary: One of FL's largest independent banks, $5.17 billion in assets

FCB is a bank holding company with a single wholly-owned subsidiary, Florida Community Bank. Florida Community Bank operates a total of 54 branches, all located in Florida, and is one of the state's largest independent banks. As of March 31, 2014, the firm had $3.73 billion in deposits, $5.17 billion in assets, and $723.9 million in stockholders' equity.

FCB offers various banking products and services to both individuals and businesses in Florida, and has also participated in some syndicated loans to national credits. The firm's commercial customers cover a wide range of industries, from healthcare and tourism to commercial real estate and manufacturing. The firm has built a geographic footprint that covers most of Florida, including significant presences in Naples, Sarasota, Orlando, Miami, Ft. Lauderdale, West Palm Beach, and elsewhere.

FCB has built its presence in Florida by acquiring assets and liabilities from eight failed banks since its 2009 formation. The firm also acquired the business of Great Florida Bank through a merger in January 2014, picking up an additional 25 branches along with nearly $1.0 billion in assets. FCB plans to continue to pursue aggressive growth in Florida both through additional acquisitions and through organic growth.

Valuation

FCB offers the following figures in its S-1 balance sheet for the three months ended March 31, 2014:

Revenue: $52,458,000.00

Net Income: $3,528,000.00

Total Assets: $5,167,500,000.00

Total Liabilities: $4,443,631,000.00

Stockholders' Equity: $723,869,000.00

FCB posted a net income of $17.2 million for the year ended December 31, 2013, a significant improvement over its $4.8 million loss for the year ended December 31, 2012.

Major Competitors: Bank of America, TD Bank, JP Morgan & Others

FCB faces significant competition both from other Florida-based banks and from national banks for commercial and individual banking customers.

Major competitors include Bank of America (NYSE:BAC), TD Bank (NYSE:TD), JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), SunTrust Bank (NYSE:STI), Regions Bank (NYSE:RF), BB&T (NYSE:BBT), and BankUnited (NYSE:BKU).

Many of these competitors have access to far greater financial and marketing resources than FCB, allowing them to offer some banking products or services that are beyond FCB's means. Some competitors also have longer operating histories in FCB's markets than FCB and have established relationships in those areas.

Management Experience

Kent S. Ellert has served as president and CEO of FCB since March 2013 and as the president and CEO of the firm's banking subsidiary since January 2013. He previously served as FCB's president and COO; he also serves as a director of the firm.

Mr. Ellert previously served as president and CEO of Fifth Third Bank-South Florida and worked in various positions with Wachovia over the course of nearly two decades, including executive vice president, group head Retail Banking, Southeast US regional president, Business/Commercial Banking Sales director, senior portfolio manager and Corporate Banking officer.

Mr. Ellert received a Bachelor of Business Administration degree in accounting from the University of Texas at Austin and an MBA from the University of Houston.

Conclusion: Given Very Stiff Competition, Investors Should Consider Holding Off

We are neutral to negative on this IPO and suggest investors hold off. bank IPOs do not typically do great out of the gate.

FCB has achieved impressive growth through its aggressive acquisition strategy, as well as a strong capital position.

The firm should benefit from its extensively experienced management team, and has achieved profitability for both 2013 and the first quarter of 2014.

However, the firm faces extremely potent competition, and investors may still be loathe to invest in a banking company in the wake of the recent financial collapse.

We would also prefer to see fewer insider shares in this offering.

We invite readers wishing to join the discussion on IPOs to click the +FOLLOW button above the title of this article -- and those looking for the latest developments to click +Get real-time alerts.

Note: As a large sample of information sources does not yet exist for FCB, we have taken much of the information for this article directly from FCB's S-1 filing.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.