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Florida-based OptimumBank on M&A prowl, will remain acquisitive after 1st target

Fort Lauderdale, Fla.-based OptimumBank Holdings Inc., the holding company of OptimumBank, is hungry for M&A targets as the company seeks to surpass $1 billion in assets.

OptimumBank has more than tripled its total assets over the last three years and finished the second quarter with $631.6 million in assets. The company has a goal of pushing above $1 billion in assets within the next year, Chairman Moishe Gubin said in an interview.

"I want branches, and I want equity," Gubin said. "We want to grow the amount of shareholders we have, and we want to grow the amount of deposits we have."

Gubin said the company's recent growth has not been reflected in its share price, and the hope is for M&A to help improve the stock's performance. The company's stock price had fallen 21.9% during the 12-month period ended Sept. 30, while the S&P US BMI Banks Index was down 6.4% over that same time period.

Optimum is seeking to acquire underperforming institutions and would like to maintain full control after any transaction, Gubin said. In return, Optimum, which had a return on average equity of 10.07% in the second quarter, would deliver better financial results for targets, he added.

"We're not sellers, we're buyers," Gubin said. "Let's bring you a better return and hopefully, the stock will follow."

Not just one and done

Optimum, established in 2000, has yet to make an acquisition. Optimum does have an outstanding letter of intent from a three-branch bank in "the middle of nowhere," Gubin said. Additionally, the chairman recently met with the CEO of a potential financial technology target.

Optimum is likely to remain acquisitive even after it finds its first M&A target, and the company is interested in business lines such as a residential mortgage, insurance premium financing and invoice factoring, Gubin said.

"Once we find one deal, we're going to go looking for a second deal, and when we get a second deal, we're going to find a third deal," Gubin said. "We're going to keep doing this."

Due to Optimum's low stock valuation and limited equity, any acquisition would likely be a cash deal with a small target in the range of $150 million to $250 million in assets and only a few branches, said Tom Rudkin, an M&A principal at DD&F Consulting Group.

In another interview, Eric Corrigan, a senior managing director and head of the financial institutions group at Commerce Street Capital, offered a broader asset range of $100 million to $400 million.

"Clearly, they have to focus on small stuff," Corrigan said. "They're just not big enough to do big stuff."

Scarcity and tough competition in Florida

Like the rest of the country, liquidity challenges resulting from Federal Reserve's rate-hiking cycle have slowed M&A activity in Florida. However, the state's credit unions remain "very interested" in buying banks, Rudkin said.

Credit unions also tend to pay fair prices and retain the staff of acquired banks, which will likely be tough competition for Optimum, Corrigan said.

"For smaller companies and boards, it's an attractive opportunity," Corrigan said. "In other states, that's not necessarily an issue. For instance, in Texas, there has never been a credit union acquisition of a bank and there probably never will be."

Optimum has a Fort Lauderdale branch and another branch located about 12 miles north in Deerfield Beach, Fla. Its best prospects in Florida would likely be on the east coast and in markets like Gainesville, Orlando and Tampa. However, the state only has 30-40 small banks and most of them are not for sale, Rudkin said. Therefore, it might be easier to find a target in a state like Georgia, where small banks are more abundant, he added.

"If they hired me, I would say, let's look not only in Florida but also in the state of Georgia," Rudkin said.

Out-of-state prospects

Optimum is not limiting its search to Florida, Gubin said, adding that the bank is looking for branches in states like Illinois, New York and Texas.

Even so, Gubin is not looking to conduct major lending operations outside of Florida but wants to manage Optimum's loan portfolio from its headquarters, the chairman said.

"To really go heavy and concentrated in a specific place, you need a whole lending department that knows that place," Gubin said. "I don't want to build that out because it's not worth it."

With an out-of-state deal, Optimum would allow the target's existing loans to mature and retain a loan officer to manage them but would eliminate most other staff, Gubin said.

"I don't need that overlap of deposit operations and the wire departments," Gubin said. "You can do it all through one department. We have all those synergy values."