As filed with the Securities and Exchange Commission on September 19, 2011

Registration No. 333-174227

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1 to

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

BOND STREET HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

5301 Blue Lagoon Drive, Suite 200

Miami, Florida 33126

Telephone: (305) 740-6000

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Daniel M. Healy, Chief Executive Officer

Bond Street Holdings, Inc.

5301 Blue Lagoon Drive, Suite 200

Miami, Florida 33126

Telephone: (305) 668-5425

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies to:

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.

 

 

Subject To Completion
Preliminary Prospectus, Dated September 19, 2011

 

Bond Street Holdings, Inc.

 

 

 

		Per Share		Total
Public offering price		$		$
Underwriting discounts and commissions		$		$
Proceeds, before expenses, to us		$		$

Deutsche Bank Securities	J.P. Morgan

BofA Merrill Lynch	Goldman, Sachs & Co.

 

Bank Branch Map

 

 

Branches (44)

as of August 31, 2011

 

TABLE OF CONTENTS

 

 

In this prospectus, unless the context suggests otherwise, references to “Bond Street Holdings,” “Bond Street,” “the Company,” “we,” “us,” and “our” mean the combined business of Bond Street Holdings, Inc. and its consolidated subsidiaries, including Florida Community Bank, National Association; and references to “the Bank” refer to our wholly-owned banking subsidiary, Florida Community Bank, National Association (formerly known as Premier American Bank, National Association), and its consolidated subsidiaries. References to the “Old Banks” include Premier American Bank, or Old Premier, Florida Community Bank, or Old FCB, Peninsula Bank, or Old Peninsula, Sunshine State Community Bank, or Old Sunshine, First National Bank of Central Florida, or Old FNBCF, Cortez Community Bank, or Old Cortez, Coastal Bank, or Old Coastal, and First Peoples Bank, or Old FPB, in each case, before the acquisition of certain assets and assumption of certain liabilities of each of the Old Banks by the Company. References to our Class A Common Stock refer to our Class A voting common stock, par value $0.001 per share; references to our Class B Common Stock refer to our Class B non-voting common stock, par value $0.001 per share; and references to our common stock include our Class A Common Stock and our Class B Common Stock.

ABOUT THIS PROSPECTUS

 

You should rely only on the information contained in this prospectus. We and the underwriters have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are offering to sell, and seeking offers to buy, shares of our Class A Common Stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our Class A Common Stock. Our business, financial condition, results of operations and prospects may have changed since that date.

 

No action is being taken in any jurisdiction outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe, any restrictions as to the offering and the distribution of this prospectus applicable to those jurisdictions.

INDUSTRY AND MARKET DATA

 

The market data and other statistical information used throughout this prospectus are based on independent industry publications. Some data is also based on our good faith estimates, which are derived from our review of internal surveys, as well as independent industry publications, government publications, reports by market research firms or other published independent sources. None of the independent industry publications referred to in this prospectus was prepared on our or our affiliates’ behalf or at our expense.

 

Some of the statements under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. We generally identify forward-looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this prospectus are based on our historical performance, the historical performance of the Old Banks or on our current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us, the underwriters or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere in this prospectus. We do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement on Form S-1, of which this prospectus is a part, that we have filed with the Securities and Exchange Commission, completely and with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect and that these differences may be material. We qualify all of our forward-looking statements by these cautionary statements.

 

PROSPECTUS SUMMARY

	•	Miami-Fort Lauderdale-Pompano Beach, with a total population of approximately 5.5 million, median household income of $51,835 and approximately 260,000 active businesses;

	•	Orlando-Kissimmee-Sanford, with a total population of approximately 2.1 million, median household income of $53,598 and approximately 95,000 active businesses; and
	•	Cape Coral-Fort Myers, with a total population of approximately 630,000, median household income of $51,699 and approximately 30,000 active businesses.

	•	Experienced and Talented Management Team.  Our senior management team has substantial experience with regional banking franchises, including with North Fork Bancorporation, Bank One, and the Florida operations of Fifth Third Bank and Wachovia Bank. Additionally, we have recruited a substantial number of seasoned commercial bankers with significant experience in the Bank’s markets.

	•	Extensive Target Evaluation Capabilities and Successful Acquisition Integration Experience.  We believe that we have demonstrated our ability to effectively identify, analyze, acquire and integrate troubled banking businesses in Florida. Since January 2010, we have successfully acquired eight such institutions on what we believe were attractive terms, six of which have been successfully integrated onto one common operating platform. We expect to integrate the remaining banks by February 2012.

	•	Seasoned Loan Workout Team.  As we continue to grow, we expect that the collection and workout of acquired loans will continue to be a significant source of income. We have assembled a management team with extensive experience evaluating nonperforming assets and the subsequent workout of those assets. This group consists of over 30 full time employees with responsibility for the ongoing credit management and strategic workout of acquired loan portfolios.

	•	Full-Service Scalable Banking Platform.  Since our first Acquisition, we have focused on investing in our infrastructure and technology to create an efficient, scalable platform to support future growth, support our risk management activities and enhance lending and fee income opportunities through a full suite of traditional banking products and services.

	•	Robust Commercial Business Platform.  We have substantially built out our commercial banking platform in our strategic Florida markets to provide a full range of banking services to our commercial customers, including a full suite of treasury management services. As a result, we have closed approximately $279.5 million of commercial loans in the six months ended June 30, 2011.

	•	Strong Capital Position.  We believe our strong capital position affords us the opportunity to pursue our growth strategy. As of June 30, 2011 and December 31, 2010, our Tier 1 leverage ratio was 23.6% and 29.4%, respectively, our Tier 1 risk-based capital ratio was 52.6% and 104.1%, respectively, our Total risk-based capital ratio was 53.4% and 105.4%,

	•	Liquidity Position.  We believe our significant cash reserves and liquid securities portfolio held by the Bank position us well for future growth. As of June 30, 2011 and December 31, 2010, the Bank had investment securities of approximately $1.7 billion and $1.6 billion, respectively, the majority of which was held in U.S. government agencies and U.S. government sponsored enterprises obligations. The remaining investment portfolio was comprised primarily of highly liquid investment-grade securities.

	•	Limited Credit Risk.  As of June 30, 2011 and December 31, 2010, in excess of 74.5% and 98.3%, respectively, of our loan portfolio was covered by loss sharing arrangements with the FDIC, resulting in limited credit risk exposure. In addition, we have adopted what we believe are conservative credit standards and disciplined underwriting requirements to maintain proper credit risk management.

	•	Pursue Acquisition Opportunities.  Over the next several years, we intend to acquire other banking institutions or their assets and deposits to meet our growth objectives.

	•	Expand Commercial Lending Business.  We intend to continue to expand our commercial lending business through the build out and staffing of our commercial banking platform. To date, we have hired experienced commercial bankers in each of our metro markets to focus on larger commercial relationships, and have enhanced our community banking platform with an experienced leader in the industry and continue to hire other community and business bankers in our Florida markets. We believe these efforts will help increase our loan origination and associated revenue and attract new transaction account deposits that provide a lower cost of funds.

	•	Expand Residential Mortgage Lending Business.  We intend to continue to build out our residential mortgage loan origination platform. We have hired a team consisting of an experienced mortgage origination leader, mortgage loan originators covering our key markets and a mortgage loan processing and underwriting staff. We have also contracted with a third-party mortgage origination service provider to provide the necessary compliance and servicing functionality for our mortgage business. We may elect not to retain a significant portion of the mortgage loans we originate and expect to seek to sell these assets to third parties as opportunities arise. These efforts are designed to increase mortgage lending revenue as well as expand our existing suite of services to attract new deposits.

	•	Attract and Retain Retail Deposits.  The Bank has developed and deployed a successful branded conversion strategy, titled “Stronger Than Ever,” to support the stabilization of our customer and deposit base. We intend to continue pursuing these strategies with respect to future acquisitions with the goal of continuing to attract and retain key customers and core deposits.

	•	Build the Systems and Product Suite Necessary for a Leading Regional Banking Franchise. We have integrated and significantly upgraded the core operating systems previously utilized by six of the eight banks we acquired from the FDIC, as receiver, with the remaining two banks expected to be integrated onto the core operating system by early 2012. Our core operating system enables us to provide a full suite of high quality products and services to our customers, which include integrated payables and receivables and e-banking services, and a suite of treasury services products such as remote deposit capture, account lock box services, fraud prevention capabilities, zero balance accounts, mobile banking and automatic cash sweeps.

Common Stock Offered by Us		shares of Class A Common Stock

Over-allotment Option		shares of Class A Common Stock

Common Stock to be Outstanding Immediately After the Offering		shares of common stock, consisting of          shares of Class A Common Stock and 4,462,692 shares of Class B Common Stock

Use of Proceeds		We estimate that we will receive net proceeds from the offering of approximately $     million, or $     million if the option to purchase additional shares of Class A Common Stock is exercised in full by the underwriters, assuming an initial public offering price of $     per share, the midpoint of the range set forth on the cover page of this prospectus. We intend to use the net proceeds from the offering for general corporate purposes, including acquisitions consistent with our growth strategy. See “Use of Proceeds.”

Regulatory Ownership Restrictions		We are a bank holding company. A holder of shares of common stock (or group of holders acting in concert) that (i) directly or indirectly owns, controls or has the power to vote more than 5% of the total voting power of the Company, (ii) directly or indirectly owns, controls or has the power to vote 10% or more of any class of voting securities of the Company, (iii) directly or indirectly owns, controls or has the power to vote 25% or more of the total equity of the Company, or (iv) is otherwise deemed to “control” the Company under applicable regulatory standards may be subject to important restrictions, such as prior regulatory notice or approval requirements and applicable provisions of the FDIC Statement of Policy on Qualifications for Failed Bank Acquisitions, or FDIC Policy. See “Supervision and Regulation—FDIC Statement of Policy on Qualifications for Failed Bank Acquisitions” and “Risk Factors—We and certain of our stockholders, including those who have agreed to become part of an “anchor group,” are required to comply with the applicable provisions of the FDIC Statement of Policy on Qualifications for Failed Bank Acquisitions, including a prohibition on sales or transfers of our securities by each such stockholder until three years from such stockholder’s acquisition of shares of common stock (except in the case of certain mutual fund holders) without prior FDIC approval.” For

		a further discussion of regulatory ownership restrictions see “Supervision and Regulation.”
Classes of Common Stock; Voting Rights; Conversion		The shares of common stock of the Company are divided into two classes: Class A Common Stock and Class B Common Stock. The Class A Common Stock possesses all of the voting power for all matters requiring action by holders of the Company’s common stock, with certain limited exceptions. Each share of Class B Common Stock is convertible into one share of Class A Common Stock, subject to certain restrictions. The Class A Common Stock is not convertible. Other than with respect to voting rights and the restrictions on transfer and conversion relating to the Class B Common Stock described in this prospectus, the Class A Common Stock and the Class B Common Stock are treated equally and identically, including with respect to distributions. See “Description of Capital Stock—Common Stock” for a further discussion of our common stock.
Dividend Policy		We do not currently intend to pay dividends on shares of our common stock for the foreseeable future. We are a bank holding company and accordingly, any dividends paid by us are subject to various federal and state regulatory limitations and also may be subject to the ability of our subsidiary depository institution(s) to make distributions or pay dividends to us. The ability of the Company to pay dividends is limited by minimum capital and other requirements prescribed by law and regulation. In addition, our agreement with the Office of the Comptroller of the Currency, or the OCC (the “OCC Agreement”) (which was entered into in connection with the acquisition of Old Premier), prohibits the Bank from paying a dividend to us prior to January 25, 2013. After January 25, 2013, the OCC Agreement imposes other restrictions on the Bank’s ability to pay dividends to us, including requiring prior approval from the OCC, before any dividends are paid. Banking regulators have authority to impose additional limits on dividends and distributions by the Company and its subsidiaries. Certain restrictive covenants in future debt instruments, if any, may also limit our ability to pay dividends or the Bank’s ability to make distributions or pay dividends to us. See “Dividend Policy” and “Supervision and Regulation—Regulatory Limits on Dividends and Distributions.”

Proposed New York Stock Exchange Symbol		We intend to apply to list our Class A Common Stock on the New York Stock Exchange under the trading symbol “BSH.”

	•	up to     shares of Class A Common Stock that may become issuable by the Company to the FDIC pursuant to the value appreciation instrument agreements (as described more fully in “Business—Acquisitions”) assuming that the FDIC elects to settle amounts due under such instruments in shares of Class A Common Stock and assuming a price of $      per share, the midpoint of the range set forth on the cover page of this prospectus;

	•	up to     shares of Class A Common Stock issuable by us upon exercise of the underwriters’ over-allotment option;

	•	3,310,428 shares of Class A Common Stock issuable upon the exercise of outstanding warrants with an expiration date of November 12, 2016 at exercise prices of $24.24, $26.18 and $28.28 per share, each for one-third of such shares;
	•	2,142,000 shares of Class A Common Stock issuable upon the exercise of outstanding warrants with an expiration date of August 13, 2017 at an exercise price of between $26.45 and $35.99 per share (depending on the date of exercise);
	•	2,700,501 shares of Class A Common Stock issuable upon the exercise of outstanding stock options under the Bond Street Holdings LLC 2009 Option Plan, as amended (the “2009 Option Plan”), with a weighted average exercise price of $20.57 per share; and
	•	an aggregate of 1,000,659 shares of common stock reserved for future issuance under the 2009 Option Plan.

										Year Ended
		Six Months Ended June 30,								December 31,
		2011				2010				2010
		(Unaudited)
		(dollars in thousands)
Summary Results of Operations Data
Interest income		$	40,986			$	16,032			$	46,573
Interest expense			11,554				4,985				14,848
Net interest income			29,432				11,047				31,725
Provision for loan losses			3,866				119				9,862
Net interest income after provision for loan losses			25,566				10,928				21,863
Non-interest income			16,550				33,040				64,074
Non-interest expenses			53,372				19,769				68,111
(Loss) income before income tax benefit			(11,256	)			24,199				17,826
Income tax (benefit) expense			(7,679	)			264				(3,807	)
Net (loss) income		$	(3,577	)		$	23,935			$	21,633
Per Share Data
Earnings (loss)
Basic		$	(0.10	)		$	1.05			$	0.77
Diluted		$	(0.10	)		$	1.05			$	0.77
Tangible book value		$	19.14			$	11.85			$	19.51
Weighted average shares outstanding
Basic			37,011,598				22,731,605				28,247,986
Diluted			37,011,598				22,731,605				28,247,986

						As of
		As of June 30,				December 31,
		2011				2010
		(Unaudited)
		(dollars in thousands)
Summary Balance Sheet Data
Cash and cash equivalents		$	76,707			$	43,412
Investment securities			1,706,776				1,643,657
Loans receivable, net
Not covered under FDIC loss sharing agreements			249,574				8,679
Covered under FDIC loss sharing agreements			729,310				506,642
FDIC loss share indemnification asset			234,805				162,596
Other real estate owned			50,435				23,219
Goodwill and other intangible assets, net			25,065				6,423
Other assets			55,308				59,033
Total assets		$	3,127,980			$	2,453,661
Deposits		$	2,087,046			$	1,514,259
Advances from Federal Home Loan Bank (FHLB)			237,204				176,689
Other liabilities			70,347				34,010
Total liabilities			2,394,597				1,724,958
Stockholders’ equity			733,383				728,703
Total liabilities and stockholders’ equity		$	3,127,980			$	2,453,661
						As of and for the Year Ended
		As of and for the Six Months Ended June 30,				December 31,
		2011				2010
Performance Ratios
Interest rate spread			2.16	%			2.06	%
Net interest margin			2.47	%			2.30	%
Return on average assets			(0.3	)%			1.2	%
Return on average equity			(1.0	)%			3.9	%
Efficiency ratio (bank level)(1)			102.5	%			67.1	%
Average interest-earning assets to average interest-bearing liabilities			131.8	%			122.0	%
Average loans receivable to average deposits			42.3	%			39.2	%
Cost of interest-bearing liabilities			1.28	%			1.31	%

						As of
		As of June 30,				December 31,
		2011				2010
		(Unaudited)
		(dollars in thousands)
Asset Quality
Nonperforming loans(2) to loans receivable
Covered under loss sharing agreements with the FDIC			20.4	%			27.2	%
Not covered under loss sharing agreements with the FDIC			1.2	%			0.2	%
Nonperforming assets to total assets (3)
Covered under loss sharing agreements with the FDIC			7.8	%			6.7	%
Not covered under loss sharing agreements with the FDIC			0.5	%			0.0	%
Allowance for loan losses (ALL) to nonperforming loans(2)			5.3	%			6.4	%
Capital Ratios (Company)
Average equity to average total assets			26.8	%			29.6	%
Tangible common equity ratio			22.7	%			29.4	%
Tier 1 leverage ratio			23.6	%			29.4	%
Tier 1 risk-based capital ratio			52.6	%			104.1	%
Total risk-based capital ratio			53.4	%			105.4	%
Capital Ratios (Bank)
Average equity to average total assets			12.5	%			8.6	%
Tangible common equity ratio			12.7	%			12.4	%
Tier 1 leverage ratio			13.3	%			13.5	%
Tier 1 risk-based capital ratio			29.6	%			51.2	%
Total risk-based capital ratio			30.4	%			52.5	%

(1)		Non-interest expense over (net interest income plus non-interest income). Includes expenses related to the Acquisitions.
(2)		Nonperforming loans includes loans or pools of loans that are considered impaired but retain accrual status due to accretion and loans in non-accrual status.

(3)		Nonperforming assets includes loans or pools of loans that are considered impaired but retain accrual status due to accretion and loans in non-accrual status and other real estate owned, or OREO.

 

Investing in our Class A Common Stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus, before deciding whether to invest in our Class A Common Stock. If any of the events highlighted in the following risks actually occurs, our business, results of operations or financial condition would likely suffer. In such an event, the trading price of our Class A Common Stock could decline and you could lose all or part of your investment.

 

Risks Related to Our Business and Industry

 

We have recently completed eight acquisitions and have a limited operating history from which investors can evaluate our profitability and prospects.

 

The Company was organized in April 2009 and acquired certain of the assets and assumed certain liabilities of three failed banks in 2010 and five in 2011. We have completed the process of integrating six of the acquired banking platforms (Old Premier, Old FCB, Old Peninsula, Old Sunshine, Old FNBCF and Old Cortez) into a single unified operating platform and we are in the process of integrating the remaining acquired banking platforms. Because our banking operations began in 2010, we do not have a meaningful operating history upon which investors can evaluate our operational performance or compare our recent performance to historical performance. Although we acquired certain assets and assumed certain liabilities of eight failed financial institutions which had operated for longer periods of time than we have, their business models and experiences are not reflective of our plans. Accordingly, our limited time running the Old Banks’ operations may make it difficult to predict our future prospects and financial performance based on the prior performance of such depository institutions. Moreover, given that most of the loans and OREO we acquired in the Acquisitions are covered by loss sharing agreements with the FDIC, the historical financial results of the acquired banks are immaterial to an understanding of our future operations. In addition, our business since January 22, 2010 and for the immediate future relies heavily on our acquisition activities, on our loss share resolution business and on the remediation and disposal of assets we acquired from the FDIC and is fundamentally different from the business of the Old Banks. Certain other factors may also make it difficult to predict our future financial and operating performance including, among others:

 

 

 

Since a large portion of our income is currently generated from the accretable discounts on purchased loans and the accretion (amortization) of the FDIC loss share indemnification asset, which over time will need to be replaced with performing interest-earning assets, the failure to generate sufficient organic loan origination and other asset growth could have an adverse impact on our future financial condition and earnings.

 

As a result of our FDIC-assisted acquisitions, a significant portion of our current income over the next several years will be derived from the realization of accretable discounts on the loans that we purchased and from the accretion (amortization) of the FDIC indemnification asset associated with the FDIC loss sharing agreements. For the six months ended June 30, 2011, we recognized $26.5 million of income, or 46.6% of total income, and for the year ended December 31, 2010, we recognized $37.5 million of income, or 33.7% of total income, in each case, from the accretable discounts on our acquired loans and the accretion (amortization) of the FDIC indemnification asset. If we are unable to replace our acquired loans and the related discount accretion with new performing loans and other performing assets, our financial condition and earnings would be adversely affected.

 

Failure to comply with the terms of our loss sharing agreements with the FDIC may result in significant losses.

 

We have purchased certain of the assets and assumed certain of the liabilities of eight failed banks from the FDIC, and presently a substantial portion of our revenue is derived from those assets. A significant portion of the losses related to the Covered Assets acquired in six of those transactions will be borne by the FDIC. We are subject to audit by the FDIC at its discretion to ensure we are in compliance with the terms of the corresponding loss sharing agreements. We may experience difficulties in complying with the terms of such loss sharing agreements, which could result in the loss of some or all of the loss sharing coverage and our being required to recognize the full amount of any such uncovered losses. Any significant loss of coverage would have a material adverse effect on our business.

 

Certain provisions of the loss sharing agreements entered into with the FDIC may have anti-takeover effects and could limit our ability to engage in certain strategic transactions that would be in the best interests of stockholders.

 

Our loss sharing agreements with the FDIC require that in order to maintain loss share coverage we must receive FDIC consent prior to us or certain of our stockholders engaging in certain transactions. We may not transfer or otherwise assign any loss sharing agreement without FDIC consent, and, among other things, prior FDIC consent is required for certain mergers or consolidations of the Company or the Bank with or into another company, the sale of all or substantially all of the assets of the Bank, the sale of a certain percentage of our shares by the Company, and a stockholder or a group of stockholders acting in concert. Such a sale by stockholders may occur beyond our control. In addition, under the Old Premier and Old FCB loss sharing agreements, any public or private offering of common stock by us that would increase our outstanding shares by more than 9% requires the consent of the FDIC. Under the Old Peninsula, Old FNBCF, Old Cortez and Old Coastal loss sharing agreements, any merger or consolidation of the Company or the Bank with or into another company, if the stockholders of the Company or the Bank will own less than 662/3% of the consolidated entity as a result of such transaction, requires the consent of the FDIC. When the consent of the FDIC is required under the loss sharing agreements, the FDIC may withhold its consent or may condition its consent on terms that we do not find acceptable. If the FDIC does not grant its consent to a transaction we would like to pursue, or conditions its consent on terms that we do not find acceptable, we may be unable to engage in certain corporate or strategic transactions that might otherwise benefit our stockholders or we may elect to pursue a transaction without

obtaining FDIC consent. If we failed to obtain prior FDIC consent and the FDIC withdrew its loss share protection, there could be a material adverse effect on our financial condition, results of operations and cash flows.

 

If we fail to effectively manage credit risk, our business and financial condition will suffer.

 

We must effectively manage credit risk. There are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting and guidelines, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers and risks resulting from uncertainties as to the future value of collateral. The majority of loans held by the Bank were acquired in six transactions which are covered by FDIC loss sharing arrangements, and two transactions with the FDIC which are not subject to FDIC loss sharing coverage. In addition, a primary component of our strategy is to grow our commercial loan origination business. There is no assurance that our credit risk monitoring and loan approval procedures are or will be adequate or will reduce the inherent risks associated with lending. Our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of our loan portfolio. Any failure to manage such credit risks may materially adversely affect our business and our consolidated results of operations and financial condition.

 

Economic and market developments, including the potential for inflation, may have an adverse effect on our business, possibly in ways that are not predictable or that we may fail to anticipate.

 

Economic and market disruptions that have persisted in recent years and the potential for future economic disruptions and inflation present considerable risks and challenges to us. Dramatic declines in the housing market and increasing business failures have negatively impacted the performance of mortgage, commercial and construction loans and resulted in significant write downs of assets by many financial institutions. General downward economic trends, reduced availability of commercial credit and high unemployment have also negatively impacted the credit performance of commercial and consumer loans, resulting in additional write downs. These risks and challenges have significantly diminished overall confidence in the national economy, the financial markets and many financial institutions. This reduced confidence could further compound the overall market disruptions and risks to banks and bank holding companies, including us. These conditions, among others, are some of the factors that ultimately led to the failure of the banks whose assets we have purchased to date. Although, as a new market entrant in 2010, we benefited from these market dislocations as reflected in our purchase price for the acquired assets, continuation or further deterioration of weak real estate markets and related impacts, including increasing foreclosures, business failures and unemployment, may adversely affect our results of operations, especially as we attempt to increase our loan origination activities which will not be protected by loss sharing arrangements with the FDIC. A continued decline in real estate values could also lead to higher charge-offs in the event of defaults in our real estate loan portfolio. Given that our business may be similar in certain respects to the failed banks whose assets and liabilities we acquired, and that we may be serving the same general customer base with portions of a product mix which may be similar to that of the failed banks, there is no guarantee that similar economic conditions to those which adversely affected the failed banks’ results of operations will not similarly adversely affect our results of operations.

Our business and operations are located in Florida, which has experienced, and may continue to experience, economic difficulties worse than many other parts of the United States.

 

In addition to general, regional, national and international economic conditions, our operating performance will be impacted by the economic conditions in Florida. The declines in, and volatility relating to, the value of real estate, which, according to the Case-Shiller index has decreased approximately 48% from January 2006 to June 2011, on average, for residential real estate in Florida, disruption in the credit markets, increase in unemployment levels, decreased availability of financing for commercial borrowers in Florida have, among other factors, resulted in low consumer confidence, depressed real estate markets and a regional economic performance that has been worse than for the United States as a whole. These conditions may continue or worsen in Florida, even if the general economic conditions in the United States show continued signs of improvement. In addition, the Florida economy is largely dependent on the tourism industry. If there is a significant decline in tourism, the resulting economic effect could have a material negative impact on our operating results by reducing our growth prospects, affecting the ability of our customers to repay their loans to us and generally adversely affecting our financial condition.

 

As of June 30, 2011, approximately 67.9% of our loan portfolio was secured by commercial properties and approximately 10.9% of our loan portfolio was secured by residential properties, in each case including properties under construction, located in Florida. It is possible that a substantial portion of our future loan activities will involve commercial and residential properties in Florida. A concentration of our loans in Florida subjects us to the risk that a failure of the Florida economy to recover or a further downturn could result in a lower than expected loan origination volume and higher than expected delinquency and foreclosure rates or losses on loans. Further, if Florida real estate markets do not recover, it will become more difficult and costly for us to liquidate foreclosed properties. The occurrence of a natural disaster in Florida, such as a hurricane, tropical storm, tsunami or other severe weather event, or a manmade disaster, such as the 2010 oil spill in the Gulf of Mexico, could negatively impact regional economic conditions, cause a decline in the value or destruction of mortgaged properties and an increase in the risk of delinquencies, foreclosures or loss on loans originated by us, damage our banking facilities and offices and negatively impact our growth strategy. In addition, many residents and businesses in Florida have incurred significantly higher property and casualty insurance premiums on their properties, which has and may continue to adversely affect real estate sales and values in our markets. We may suffer further losses due to the decline in the value of the properties underlying our mortgage loans, which could have a material adverse impact on our operations. Any individual factor or a combination of factors could materially negatively impact our business, financial condition, results of operations and prospects. A high rate of foreclosures or loan delinquencies, particularly if those loans were not covered by loss sharing agreements, could have a material adverse effect on our operations and our business.

 

Changes in national and local economic conditions could lead to higher loan charge-offs which could have a material adverse impact on our business.

 

Although the loan portfolios acquired in the acquisitions of the Old Banks have been initially accounted for at fair value, we do not yet know whether a significant amount of loans will become impaired, and impairment may result in additional charge-offs to the portfolio. The fluctuations in national, regional and local economic conditions, including those related to local residential, commercial real estate and construction markets, may increase the level of charge-offs that we make to our loan portfolio, including any loans we originate or acquire in the future, and, consequently, reduce our net income. These fluctuations are not predictable, cannot be controlled and may have a material adverse impact on our operations and financial condition even if other favorable events occur.

Although we have entered into loss sharing agreements with the FDIC in six of the eight Acquisitions, which provide that a significant portion of losses related to those Covered Assets will be borne by the FDIC, we are not protected against all losses resulting from charge-offs with respect to those loan portfolios. In addition, none of our newly originated loans nor any of the assets acquired in the acquisitions of Old Sunshine or Old FPB are covered by loss sharing agreements. Additionally, the loss sharing agreements have fixed terms. Any charge-off that we experience after the loss sharing agreements expire will not be reimbursed by the FDIC and would negatively impact our net income. If any of those events occur, our losses could increase. For a more detailed discussion of the loss sharing agreements, see “Business—Acquisitions.”

 

Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans.

 

As of June 30, 2011, commercial and industrial loans constituted $147.6 million, or 14.8%, and commercial real estate loans constituted $514.0 million, or 51.4%, of our total loan portfolio, respectively. We expect that over time, newly-originated loans will be more heavily focused on commercial and industrial loans and significantly less heavily focused on commercial real estate loans. To the extent that the Bank extends credit to commercial borrowers (both commercial and industrial borrowers and commercial real estate borrowers), such loans may involve greater risks than other types of lending. Because payments on such loans are often dependent on the successful operation or development of the property or business involved, repayment of such loans is more sensitive than other types of loans to adverse conditions in the real estate market or the general economy. Unlike residential mortgage loans, which generally are made on the basis of the borrowers’ ability to make repayment from their employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial loans typically are made on the basis of the borrowers’ ability to make repayment from the cash flow of the related commercial venture. If the cash flow from business operations is reduced, the borrower’s ability to repay the loan may be impaired. Due to the larger average size of a commercial loan in comparison to other loans such as residential loans, as well as the collateral which is generally less readily-marketable, losses incurred on a small number of commercial loans, to the extent not covered by FDIC loss sharing arrangements, could have a material adverse impact on our financial condition and results of operations. In addition, commercial loan customers often have the ability to fund current interest payments through additional borrowings, and as a result the actual credit risk associated with these customers may be worse than anticipated.

 

The performance of our residential loan portfolio depends in part upon a third party service provider and a failure by this third party to perform its obligations could adversely affect our results of operations or financial condition.

 

Substantially all of our residential loans are serviced by Bayview Loan Servicing, LLC, or BLS, which provides both primary servicing and special servicing. Primary servicing includes the collection of regular payments, processing of taxes and insurance, processing of payoffs, handling borrower inquiries and reporting to the borrower. Special servicing is focused on borrowers who are delinquent or on loans which are more complex or in need of more hands-on attention. If current housing market trends continue or worsen, the number of delinquent mortgage loans serviced by BLS could increase. In the event that BLS, or any third-party servicer we may use in the future, fails to perform its servicing duties or performs those duties inadequately, we could experience a temporary interruption in collecting principal and interest, sustain credit losses on our loans or incur additional costs associated with obtaining a replacement servicer. Any of these events could have a material adverse impact on our results of operations or financial condition. Similarly, if BLS or any future third-party mortgage loan servicer becomes ineligible, unwilling or unable to continue to perform servicing activities, we

could incur additional costs to obtain a replacement servicer and there can be no assurance that a replacement servicer could be retained in a timely manner or at similar rates.

 

We are exposed to risk of environmental liabilities with respect to properties to which we take title.

 

In the course of our business, we may own or foreclose and take title to real estate, and we could become subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or we may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we were to become the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If we ever become subject to significant environmental liabilities, our business, financial condition, liquidity and results of operations could be materially and adversely affected.

 

We are subject to losses due to the errors or fraudulent behavior of employees or third parties.

 

We are exposed to many types of operational risk, including the risk of fraud by employees and outsiders, clerical recordkeeping errors and transactional errors. Our business is dependent on our employees as well as third-party service providers to process a large number of increasingly complex transactions. We could be materially adversely affected if one of our employees causes a significant operational breakdown or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. When we originate loans, we rely upon information supplied by loan applicants and third parties, including the information contained in the loan application, property appraisal and title information, if applicable, and employment and income documentation provided by third parties. If any of this information is misrepresented and such misrepresentation is not detected prior to loan funding, we generally bear the risk of loss associated with the misrepresentation. Any of these occurrences could result in a diminished ability of us to operate our business, potential liability to customers, reputational damage and regulatory intervention, which could negatively impact our business, financial condition and results of operations.

 

Our deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings.

 

The FDIC insures deposits at FDIC-insured depository institutions, such as the Bank, up to applicable limits. The amount of a particular institution’s deposit insurance assessment is based on that institution’s risk classification under an FDIC risk-based assessment system. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to its regulators. Recent market developments and bank failures significantly depleted the FDIC’s deposit insurance fund (DIF), and reduced the ratio of reserves to insured deposits. As a result of recent economic conditions and the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), banks are now assessed deposit insurance premiums based on the bank’s average consolidated total assets, and the FDIC has modified certain risk-based adjustments which increase or decrease a bank’s overall assessment rate. This has resulted in increases to the deposit insurance assessment rates and thus raised deposit premiums for insured depository institutions. If these increases are insufficient for the DIF to meet its funding requirements, further special assessments or increases in deposit insurance premiums may be required. We are

generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures, we may be required to pay even higher FDIC premiums than the recently increased levels. Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, may limit our ability to pursue certain business opportunities, or otherwise negatively impact our operations.

 

Changes in interest rates could negatively impact our net interest income, weaken demand for our products and services or harm our results of operations and cash flows.

 

Our earnings and cash flows are anticipated to be largely dependent upon net interest income, which is the difference between interest income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, particularly the Board of Governors of the Federal Reserve System, or the Federal Reserve. Changes in monetary policy, including changes in interest rates, could influence the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, but such changes could also adversely affect (1) our ability to originate loans and obtain deposits, (2) the fair value of our financial assets and liabilities, (3) our ability to realize gains on the sale of assets and (4) the average duration of our mortgage-backed investment securities portfolio. An increase in interest rates may reduce customers’ desire to borrow money from us as it increases their borrowing costs and may potentially adversely affect their ability to pay the principal or interest on loans. A portion of our loan portfolios are floating rate loans. Consequently, an increase in interest rates may lead to an increase in nonperforming assets and a reduction of income recognized, which could harm our results of operations and cash flows. In contrast, decreasing interest rates may have the effect of causing customers to refinance loans faster than originally anticipated. Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on net interest income, asset quality, loan origination volume, financial condition, results of operations and prospects.

 

The fair value of our investment securities can fluctuate due to market conditions out of our control.

 

As of June 30, 2011, the fair value of our investment securities portfolio held at the Bank was approximately $1.7 billion. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. These factors include but are not limited to rating agency downgrades of the securities, defaults by the issuer or with respect to the underlying securities, changes in market interest rates and continued instability in the credit markets. In addition, we have historically taken a conservative investment posture, with concentrations of government issuances of short duration. In the future, we may seek to increase yields through more aggressive investment strategies, which may include a greater percentage of corporate issuances and structured credit products. Any of these mentioned factors, among others, could cause other- than-temporary impairments in future periods and result in realized losses, which could have a material adverse effect on our business.

 

Any requested or required changes in how we determine the impact of loss share accounting on our financial information could have a material adverse effect on our reported results.

 

Our financial results are significantly affected by the application of loss share accounting, which is subject to assumptions and judgments made by us, our accountants and the

regulatory agencies to whom we report such information. Loss share accounting is a complex accounting methodology. If these assumptions are incorrect, any change or modification could have a material adverse effect on our financial condition, operations or our previously reported results. As such, any financial information generated through the use of loss share accounting is subject to modification or change. Any significant modification or change in such information could have a material adverse effect on our results of operations and our previously reported results.

 

Our financial information reflects the application of acquisition accounting. Any change in the assumptions used in such methodology could have an adverse effect on our results of operations.

 

As we recently acquired all of our operating assets and assumed substantially all of our liabilities from third parties, our financial results are heavily influenced by the application of acquisition accounting. Acquisition accounting requires management to make assumptions regarding the assets purchased and liabilities assumed to determine their fair market value. If these assumptions are incorrect, any change or modification required could have a material adverse effect on our financial condition, operations or our previously reported results.

 

We depend on our senior management team, and the unexpected loss of one or more of our senior executives could adversely affect our business and financial results.

 

Our future success significantly depends on the continued services and performance of our key management personnel and our future performance will depend on our ability to motivate and retain these and other key personnel. The loss of the services of members of our senior management, or other key employees, or the inability to attract additional qualified personnel as needed, could materially and adversely affect our businesses and our consolidated results of operations and financial condition.

 

We may not be able to retain or develop a strong core deposit base or other low-cost funding sources.

 

We expect to depend on checking, savings and money market deposit account balances and other forms of customer deposits as our primary source of funding for our lending activities. Our future growth will largely depend on our ability to retain and grow a strong deposit base. Because a substantial majority of our existing deposit base consists of time deposits that were acquired from failed banks, it may prove harder to maintain and grow our deposit base than would otherwise be the case. We are also working to transition certain of our customers to lower cost traditional banking services as higher cost funding sources, such as high interest certificates of deposit, mature. Many banks in Florida are struggling to maintain depositors in light of the recent financial crisis, and there may be competitive pressures to pay higher interest rates on deposits, which could increase funding costs and compress net interest margins. There is no assurance customers will transition to lower yielding savings and investment products or continue their business with the Bank, which could adversely affect our operations. Further, even if we are able to grow and maintain our deposit base, the account and deposit balances can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff. If customers move money out of bank deposits and into investments (or similar deposit products at other institutions that may provide a higher rate of return), we could lose a relatively low cost source of funds, increasing our funding costs and reducing our net interest income and net income. Additionally, any such loss of funds could result in lower loan originations, which could materially negatively impact our growth strategy.

Recent market disruptions have caused increased liquidity risks.

 

The recent disruption and illiquidity in the credit markets are continuing challenges for banking institutions that have generally made potential funding sources more difficult to access, less reliable and more expensive. In addition, liquidity in the inter-bank market, as well as the markets for commercial paper and other short-term instruments, have contracted significantly. These market conditions present significant challenges in the management of our own and our customers’ liquidity, particularly in light of our recent commencement of loan origination activities. A further deterioration in the credit markets or a prolonged period without improvement of market liquidity could adversely affect our liquidity and financial condition, including our regulatory capital ratios, and could adversely affect our business, results of operations and prospects.

 

We may not be able to meet the cash flow requirements of our depositors and borrowers if we do not maintain sufficient liquidity.

 

Liquidity is the ability to meet current and future cash flow needs on a timely basis at a reasonable cost. The Bank’s liquidity is used to make loans and to repay deposit liabilities as they become due or are demanded by customers. Potential alternative sources of liquidity include federal funds purchased and securities sold under repurchase agreements. The Bank maintains a portfolio of investment securities that may be used as a secondary source of liquidity to the extent the securities are not pledged for collateral. However, we do not expect to maintain our current level of investment securities (relative to the size of our business) as we pursue our acquisition growth strategy. Other potential sources of liquidity include the sale or securitization of loans, the utilization of available government and regulatory assistance programs, the ability to acquire national market non-core deposits, the issuance of additional collateralized borrowings such as FHLB advances, the issuance of debt securities, issuance of equity securities and borrowings through the Federal Reserve’s discount window. However, there can be no assurance that these sources will continue to be available to us on terms acceptable to us or at all. Although we currently have sufficient liquidity to meet the anticipated cash flow requirements of our depositors and borrowers, there is no guarantee that we will continue to maintain such liquidity. Without sufficient liquidity, we may not be able to meet the cash flow requirements of our depositors and borrowers, which in turn could have a material adverse impact on our operations.

 

An inadequate allowance for loan losses would reduce our earnings.

 

The loans acquired from Old Sunshine and Old FPB are not covered by any loss sharing arrangement with the FDIC. In addition, as we increase our loan origination and other product offerings, the percentage of assets not covered by the FDIC loss sharing agreements that make up our loan portfolio will increase. As such, the long-term success of our business will be largely attributable to the quality of our assets, particularly newly-originated loans. The risk of loss on originated loans not covered by FDIC loss sharing arrangements that we hold on our balance sheet will vary with, among other things, general economic conditions, the relative product mix of loans being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the quality of the collateral for the loan. For our originated loans, we will maintain an allowance for loan losses, or ALL, based on, among other things, historical rates, an evaluation of economic conditions, regular reviews of delinquencies and loan portfolio quality, and regulatory requirements. We account for loans acquired through purchase transactions under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality , or ASC 310-30. Based upon the foregoing factors, we make assumptions and judgments about the ultimate collectability of the particular loan and provide an allowance for probable loan losses based upon a percentage of the outstanding balances and for specific

loans when their ultimate collectability is considered questionable. If any of these assumptions are incorrect, it could have a material adverse effect on our earnings.

 

If borrowers and guarantors fail to perform as required by the terms of their loans, we will sustain losses.

 

Over time, as a more significant portion of our loan portfolio consists of loans originated by us or are otherwise not covered by any loss sharing arrangement, a significant source of risk arises from the possibility that losses will be sustained if the Bank’s borrowers and guarantors fail to perform in accordance with the terms of their loans and guaranties. This risk increases when the economy is weak. We have implemented underwriting and credit monitoring procedures and credit policies, including the establishment and review of the ALL, that we believe are appropriate to reduce this risk by assessing the likelihood of nonperformance and we are in the process of diversifying our credit portfolio. These policies and procedures, however, may not prevent unexpected losses that could materially adversely affect our results of operations.

 

We may not be able to effectively manage our growth.

 

As a result of the Acquisitions, we have become a relatively large organization in a short period of time. Our future operating results depend to a large extent on our ability to successfully manage our rapid growth and our ability to recruit and retain additional qualified employees, especially seasoned relationship bankers. Our business plan includes, and is dependent upon, hiring and retaining highly qualified and motivated executives and employees at every level and, in particular, bankers that have long-standing relationships within their communities. These professionals bring with them valuable customer relationships, and they will be an integral part of our ability to attract and grow deposits, generate new loan origination and grow in our market areas. We expect to experience substantial competition in our endeavor to identify, hire and retain the top-quality employees that we believe are key to our future success. If we are unable to hire and retain qualified employees, we may not be able to successfully execute our business strategy. If we are unable to effectively manage and grow the Bank, our business and our consolidated results of operations and financial condition could be materially and adversely impacted.

 

The process of integrating the assets of the Old Banks and other assets we may acquire in the future into a single unified operating platform may delay the attainment of other operating objectives.

 

While the Bank has already integrated the operations of the former platforms of Old Premier, Old FCB, Old Peninsula, Old Sunshine, Old FNBCF and Old Cortez onto a single core operating system, the process of doing so, and the process of integrating Old Coastal and Old FPB and other future acquisitions into one business, has required and will continue to require a significant amount of attention from our senior management. We are also completing implementation of a modern treasury services system in partnership with Fidelity National Information Services, Inc., or FIS, to allow the Bank to offer integrated receivables and payables and e-banking services to its commercial and industrial customers. There can be no guarantee that the conversion to a new operating platform or the implementation of a new treasury services system will provide all of the benefits anticipated by the Bank. In addition, such projects could continue to require the Bank’s management and resources to be diverted from its core business to assist with the new systems integration. We also have incurred and will continue to incur additional expenses in connection with the integration processes, and there may be service outages or delays due to the installation of such new systems (and customer issues therewith). In addition, any future acquisition may further delay the completion of a unified banking platform. Any delays or other problems with respect to these projects may

impact the financial and other benefits that the Bank’s management expects to result and could have a material adverse effect on our business, financial condition and operations. In the event that continuing our new integration processes distract senior management from continuing to build the core businesses of the Bank, our ability to operate and grow could be materially and adversely impacted.

 

Our acquisition of assets and assumption of deposits and liabilities of eight failed banks involve a number of special risks.

 

Our acquisition of certain assets and assumption of certain liabilities of each of the Old Banks followed the determination by these banks’ primary regulators that such banks had failed and the appointment of the FDIC as receiver. Although FDIC-assisted transactions mitigate certain risks, such as sharing exposure to loan losses and providing indemnification against certain liabilities of the failed institution (other than the acquisitions related to Old Sunshine and Old FPB), we are (and would be in future similar transactions) subject to many of the same risks we would face in acquiring a non-failed bank in a negotiated transaction, including risks associated with stability of the deposit base, maintaining customer relationships and failure to realize the anticipated acquisition benefits in the amounts and within the timeframes we expect. In addition, because these acquisitions were conducted by the FDIC in a manner that did not allow us the time and access to information normally associated with preparing for and evaluating a negotiated acquisition, we may face additional risks, including additional strain on management resources, management of problem loans, integration of personnel and operating systems and impact to our capital resources requiring us to raise additional capital.

 

Although our senior management team has experience managing the operations of regional banks, there may be key employees that have more knowledge or expertise about the history, region or past practices of the Old Banks. Such key employees may also have important relationship ties with the community and one or more significant existing or potential customers. If we lose such key employees or if we fail to attract qualified personnel to meet our needs, our ability to continue to maintain and grow our businesses may suffer and our consolidated results of operations and financial condition may be materially and adversely impacted.

 

There is no assurance that we will be successful in overcoming these risks or any other problems encountered in connection with our FDIC-assisted transactions. Although we have entered into loss sharing agreements with the FDIC in connection with our acquisitions of loans from each of the Old Banks (except for Old Sunshine and Old FPB), and may enter into loss sharing agreements if future FDIC-assisted transactions are consummated, we cannot guarantee that we will be able to adequately manage their respective loan portfolios within the limits of the loss protections already provided by the FDIC or in any future FDIC-assisted acquisition. Further, as was the case in connection with our acquisitions of the assets of Old Sunshine and Old FPB, we may determine even in the context of future acquisitions of failed banks from the FDIC to acquire such banks without the benefit of loss share protection, in whole or in part. Our inability to overcome these risks could have a material adverse effect on our business, financial condition and operations.

 

We are exposed to operational risks that can negatively affect our financial condition.

 

We are exposed to operational risk. In our daily operations, we rely on the continued efficacy of our technical and telecommunication systems, operational infrastructure, relationships with third parties and the vast array of associates and key executives. Failure by any or all of these resources subjects us to risks that may vary in size, scale and scope. These risks include, among other things, operational, technical and computer system failures,

ineffectiveness or exposure due to interruption in third party support, the risk of fraud or theft by employees or outsiders and unauthorized transactions by employees or operational errors (including clerical or recordkeeping errors), as well as the loss of key individuals or failure on the part of the key individuals to perform properly.

 

We are dependent on our information technology and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have an adverse effect on our financial condition and results of operations.

 

Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party servicers. We outsource many of our major systems, such as data processing, loan servicing and deposit processing systems. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to process new and renewal loans, gather deposits and provide customer service, compromise our ability to operate effectively, damage our reputation, result in a loss of customer business and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

 

We face strong competition from financial services companies and other companies that offer banking services which could negatively affect our business.

 

We currently conduct our banking operations primarily in Broward, Collier, Lee, Hendry, Charlotte, Miami-Dade, Palm Beach, Volusia, Sarasota, Orange, Seminole, Brevard, Hernando, St. Lucie, Martin and Indian River counties, all of which are located in Florida. We may not be able to compete successfully against current and future competitors, which may result in fewer customers and reduced loans and deposits. Many competitors offer banking services identical to those offered by us in our service areas. These competitors include national banks, regional banks and community banks. We also face competition from many other types of financial institutions, including without limitation, savings and loan institutions, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. Some of these competitors may have a long history of successful operations in our markets and have greater ties to local businesses and banking relationships, as well as a more well-established depositor base. Competitors with greater resources may possess an advantage by being capable of maintaining numerous banking locations in more convenient locations, owning more ATMs and conducting extensive promotional and advertising campaigns or operating at a lower fixed-cost basis through the Internet.

 

Additionally, banks and other financial institutions with larger capitalizations and financial intermediaries (some of which are not subject to bank regulatory restrictions) have larger lending limits than we have and thereby are able to serve the credit needs of larger customers. Specific areas of competition include interest rates for loans and deposits, efforts to obtain deposits and range and quality of products and services provided, including new technology-driven products and services. Technological innovation continues to contribute to greater competition in domestic and international financial services markets as technological advances enable more companies to provide financial services. Non-local banks with web-based banking are able to compete for business, further increasing competition without having a physical presence in the Florida market.

Our ability to compete successfully depends on a number of factors, including, among other things:

 

 

Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could materially harm our business, financial condition, results of operations and prospects.

 

The Bank may be mistaken for one of the failed banks whose assets and liabilities it acquired, which, along with other reputational risks, could affect our results.

 

The Bank was chartered by the OCC as a de novo national bank on January 22, 2010. Prior to July 25, 2011, the Bank operated under trade names similar to those of several of the failed banks whose assets and liabilities it acquired (i.e., Premier American Bank, Florida Community Bank (a division of Premier American Bank, N.A.), and Sunshine State Community Bank (a division of Premier American Bank, N.A.)). Effective July 25, 2011, the Bank changed its name to Florida Community Bank, National Association, and converted all retail bank branches to the Florida Community Bank brand name. By continuing to operate under a trade name similar to that of a failed institution, we must overcome the reputational damage resulting from its recent failure. Our ability to originate and maintain deposit accounts is highly dependent upon consumer and other external perceptions of our business practices and our financial health. Adverse perceptions regarding our business practices or our financial health could damage our reputation in both the customer and funding markets, leading to difficulties in generating, maintaining and financing accounts, and completing attractive loan originations. Adverse developments with respect to the consumer or other external perceptions regarding the practices of our competitors, or our industry as a whole, may also adversely impact our reputation. In addition, adverse reputational impacts on third parties with whom we have important relationships may also negatively affect our business. Such adverse reputational impacts or events may also increase our litigation risk. If we experience any of the foregoing, our business could be materially adversely affected.

 

We do not anticipate paying any dividends on our common stock for the foreseeable future. The Bank’s ability to pay dividends or lend funds to us is subject to regulatory limitations, which, to the extent we are not able to access those funds, may impair our ability to accomplish our growth strategy and pay our operating expenses.

 

We have never paid a cash dividend and do not currently anticipate paying a cash dividend in the foreseeable future. We expect to use our earnings for operations and expansion of our business. Since we are a bank holding company with no significant assets other than the capital stock of our banking subsidiary, if we exhaust the capital raised in the offering and our prior offerings, we will need to depend upon dividends from the Bank for substantially all of our income or raise capital through future offerings. Accordingly, at such time, our ability to pay dividends to our stockholders will depend primarily upon the receipt of dividends or other capital distributions from the Bank. The Bank’s ability to pay dividends to us is subject to, among other things, its earnings, financial condition and need for funds, as well as federal and

state governmental policies and regulations applicable to us and the Bank, which limit the amount that may be paid as dividends without prior approval. Currently, the Bank is not permitted to pay any dividends to us until at least January 25, 2013 and, after that date, approval of the OCC is required. As such, we will have no ability to rely on dividends from the Bank during this time period. As a result, you may only receive a return on your investment in the Class A Common Stock if its market price increases.

 

Risks Related to Our Acquisition Strategy

 

Our growth and expansion strategy involves risks and may not be successful, and our market value and profitability may suffer.

 

Growth through the acquisition of failed or failing banks, as well as the selective acquisition of assets, deposits and branches, represent an important component of our business strategy. Any future acquisitions will be accompanied by the risks commonly encountered in any acquisitions. These risks include, among other things: credit risk associated with the acquired bank’s loans and investments; difficulty of integrating operations; retaining and integrating key personnel; and potential disruption of our existing business. We expect that competition for suitable acquisition targets may be significant. We cannot assure you that we will be able to successfully identify and acquire suitable acquisition targets on terms and conditions we consider to be acceptable.

 

Failed bank acquisitions involve risks similar to acquiring open banks even though the FDIC might provide assistance to mitigate certain risks, such as sharing in exposure to loan losses and providing indemnification against certain liabilities of the failed institution. However, because these acquisitions are typically conducted by the FDIC in a manner that does not allow the time typically taken for a due diligence review or for preparing the integration of an acquired institution, we may face additional risks in transactions with the FDIC. These risks include, among other things, accuracy or completeness of due diligence materials, the loss of customers and core deposits, strain on management resources related to collection and management of problem loans and problems related to integration and retention of personnel and operating systems. There can be no assurance that we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions (including FDIC-assisted transactions). Our inability to overcome these risks could have an adverse effect on our ability to achieve our business strategy and maintain our market value and profitability.

 

As a result of acquisitions, we may be required to take write-downs or write-offs, as well as restructuring and impairment or other charges that could have a significant negative effect on our financial condition and results of operations.

 

We have conducted diligence in connection with our past acquisitions and must conduct due diligence investigations of any potential acquisition targets. Intensive due diligence is time consuming and expensive due to the operations, accounting, finance and legal professionals who must be involved in the due diligence process and the fact that such efforts do not always lead to a consummated transaction. Even if we conduct extensive due diligence on an entity we decide to acquire, this diligence may not reveal all material issues that may affect a particular entity. In addition, factors outside the control of the entity and outside of our control may later arise. If, during the diligence process, we fail to identify issues specific to an entity or the environment in which the entity operates, we may be forced to later write down or write off assets, restructure our operations, or incur impairment or other charges that could result in other reporting losses. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may become subject if we obtain debt financing. The diligence process in failed bank transactions is also expedited due to the short acquisition timeline that is typical for failing depository institutions. There can be no assurance that we will not have to

take write-downs or write-offs in connection with the acquisitions of certain of the assets and assumption of certain liabilities of each of the Old Banks, or any depository institution which we later acquire, a portion of which may not be covered by loss sharing agreements.

 

We may acquire entities with significant leverage, increasing the entity’s exposure to adverse economic factors.

 

Our future acquisitions could include entities whose capital structures may have significant leverage. Although we will seek to use leverage in a manner we believe is prudent, any leveraged capital structure of such investments will increase the exposure of the acquired entity to adverse economic factors such as rising interest rates, downturns in the economy or deteriorations in the condition of the relevant entity or their industries. If an entity cannot generate adequate cash flow to meet its debt obligations, we may suffer a partial or total loss of capital invested in such entity. To the extent there is not ample availability of financing for leveraged transactions (e.g., due to adverse changes in economic or financial market conditions or a decreased appetite for risk by lenders), our ability to consummate certain transactions could be impaired.

 

Projected operating results may be inaccurate and may vary significantly from actual results.

 

We will generally establish the pricing of transactions and the capital structure of entities to be acquired by us on the basis of financial projections for such entities. Projected operating results will normally be based primarily on management judgments. In all cases, projections are only estimates of future results that are based upon assumptions made at the time that the projections are developed. There can be no assurance that the projected results will be obtained, and actual results may vary significantly from the projections. General economic, political and market conditions, which are not predictable, can have a material adverse impact on the reliability of such projections. In the event that the projections made in connection with our acquisitions of substantially all the assets and assumption of certain of the liabilities of each Old Bank vary from actual results, or future projections with respect to new acquisitions are not accurate, such failures could materially and adversely affect our business and our consolidated results of operations and financial condition.

 

Risks Related to the Regulation of Our Industry

 

We operate in a highly regulated environment and, as a result, are subject to extensive regulation and supervision that could adversely affect our financial performance and our ability to implement our business strategy.

 

We are subject to extensive regulation, supervision and legislation that govern almost all aspects of our operations. This is primarily intended to protect customers, depositors and the DIF, and the financial system as a whole, not our equity holders. These laws and regulations, among other things, prescribe minimum capital requirements, impose limitations on our business activities, restrict the Bank’s ability to guarantee our debt and engage in certain transactions with us, impose certain specific accounting requirements on us that may be more restrictive and may result in greater or earlier charges to earnings or reductions in our capital than accounting principles generally accepted in the United States of America (GAAP). We are currently facing increased regulation and supervision of our industry as a result of the recent financial crisis in the banking and financial markets, and, to the extent that we participate in any programs established or to be established by the U.S. Treasury or by the federal bank regulatory agencies, there may be additional and changing requirements and conditions imposed on us. Such additional regulation and supervision may increase our costs and limit our ability to pursue business strategies and opportunities. Further, our failure to comply with

these laws and regulations, even if the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business activities, fines and other penalties, any of which could adversely affect our results of operations, capital base and the price of our common stock.

 

The Bank and, with respect to certain provisions the Company, is subject to an Order of the FDIC, dated January 22, 2010, or the Order, issued in connection with the FDIC’s approval of the Bank’s application for deposit insurance. The Order requires, among other things, that during the first three years of operation, the Bank obtains FDIC approval before implementing certain compensation plans, submit updated business plans and reports of material deviations from those business plans, and submit periodic loss share reports. The OCC Agreement that was entered into in connection with the acquisition of Old Premier prohibits the Bank from paying a dividend to us prior to January 25, 2013. After January 25, 2013, the OCC Agreement imposes other restrictions on the Bank’s ability to pay dividends to us, including requiring prior approval from the OCC, before any dividends are paid. A failure by the Bank to comply with the requirements of the OCC Agreement or the Order, or the objection by the OCC or the FDIC to any materials or information submitted pursuant to the OCC Agreement or the Order, could prevent us from executing our business strategy and materially and adversely affect our businesses and our consolidated results of operations and financial condition.

 

Federal bank regulatory agencies periodically conduct examinations of us and the Bank, including for compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations may adversely affect us.

 

The Federal Reserve may conduct examinations of our business and any nonbank subsidiary, including for compliance with applicable laws and regulations. In addition, the OCC periodically conducts examinations of the Bank, including for compliance with applicable laws and regulations. If, as a result of an examination, the Federal Reserve or the OCC was to determine that the financial condition, capital resources, asset quality, asset concentrations, earnings prospects, management, liquidity, sensitivity to market risk, or other aspects of any of our or the Bank’s operations had become unsatisfactory, or that we or our management were in violation of any law, regulation or guideline in effect from time to time, the Federal Reserve or the OCC may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our or the Bank’s capital, to restrict our growth, to change the composition of our concentrations in portfolio or balance sheet assets, to assess civil monetary penalties against officers or directors, to remove officers and directors and, if such conditions cannot be corrected or there is an imminent risk of loss to depositors, the FDIC may terminate the Bank’s deposit insurance.

 

The Federal Reserve may require us to commit capital resources to support our bank subsidiary.

 

As a matter of policy, the Federal Reserve, which examines us and our subsidiaries, expects a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under this requirement, in the future, we could be

required to provide financial assistance to the Bank should the Bank experience financial distress.

 

A capital injection may be required at times when we do not have the resources to provide it and therefore we may be required to borrow the funds. Any loans by a holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of the subsidiary bank. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of its note obligations. Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company’s cash flows, financial condition, results of operations and prospects.

 

The short-term and long-term impact of the new regulatory capital standards and the forthcoming new capital rules for non-Basel U.S. banks is uncertain.

 

On September 12, 2010, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced an agreement to a strengthened set of capital requirements for internationally active banking organizations in the United States and around the world, known as Basel III. Basel III increases the requirements for minimum common equity, minimum Tier 1 capital, and minimum total capital, to be phased in over time until fully phased in by January 1, 2019.

 

Various provisions of the Dodd-Frank Act increase the capital requirements of bank holding companies, such as the Company, and non-bank financial companies that are supervised by the Federal Reserve. The leverage and risk-based capital ratios of these entities may not be lower than the leverage and risk-based capital ratios for insured depository institutions. In particular, bank holding companies, many of which have long relied on trust preferred securities as a component of their regulatory capital, will no longer be permitted to count trust preferred securities toward their Tier 1 capital. While the Basel III changes and other regulatory capital requirements will likely result in generally higher regulatory capital standards, it is difficult at this time to predict how any new standards will ultimately be applied to us and the Bank.

 

The enactment of the Dodd-Frank Act may have a material effect on our operations.

 

On July 21, 2010, President Obama signed into law the Dodd-Frank Act, which imposes significant regulatory and compliance changes. The key effects of the Dodd-Frank Act on our business are:

 

 

In addition, the Dodd-Frank Act creates a new Financial Stability Oversight Council to oversee systemic risk, establishes a new system for orderly liquidation of certain systemically significant financial companies and restricts the ability of banks to engage in certain

proprietary trading or to sponsor or invest in private equity or hedge funds. The Dodd-Frank Act also mandates regulation of compensation paid by certain financial institutions to prohibit excessive compensation that could lead to inappropriate risk and loss. A new government entity, the Bureau of Consumer Financial Protection, will be created within the Federal Reserve with broad power to develop and enforce rules for bank and non-bank providers of consumer financial products. The Dodd-Frank Act also requires a wide range of advisers to private funds to register with the Securities and Exchange Commission, or SEC, and includes a number of provisions designed to improve the management of the SEC. Moreover, the Dodd-Frank Act permanently raises deposit insurance coverage to $250,000 and creates a new base for calculating the deposit insurance premium paid by insured institutions. Consequently, large banks that tend to employ various funding sources other than deposits will incur higher deposit premiums.

 

Some provisions of the Dodd-Frank Act became effective immediately upon its enactment. Many provisions, however, will require regulations to be promulgated by various federal agencies in order to be implemented, some of which have been proposed by applicable federal agencies. The changes resulting from the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements. Failure to comply with the new requirements may negatively impact our results of operations and financial condition. While we cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to investors in our common stock. For a more detailed description of the Dodd-Frank Act, see “Supervision and Regulation—Changes in Laws, Regulations, or Policies and the Dodd-Frank Act.”

 

We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

 

The federal Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Patriot Act) and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements, and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control (OFAC). If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans.

 

We and certain of our stockholders, including those who have agreed to become part of an “anchor group,” are required to comply with the applicable provisions of the FDIC Statement of Policy on Qualifications for Failed Bank Acquisitions, including a prohibition on sales or transfers of our securities by each such stockholder until three years from such stockholder’s acquisition of shares of common stock (except in the case of certain mutual fund holders) without prior FDIC approval.

 

The FDIC approved our acquisition of Old Premier by order. The approval contains a condition that the Bank, the Company and our founders comply with the applicable provisions of the FDIC Policy. The FDIC Policy imposes additional restrictions and requirements on certain institutions and their investors, to the extent that those institutions acquire a failed bank from the FDIC. Certain provisions of the FDIC Policy are summarized below. They include a higher capital requirement for the Bank and a three-year restriction on the sale or transfer of our securities by certain investors.

 

As the agency responsible for resolving failed banks, the FDIC has discretion to determine whether a party is qualified to bid on a failed institution. The FDIC adopted the FDIC Policy on August 26, 2009. The FDIC issued guidance under the FDIC Policy on January 6, 2010 and April 23, 2010.

 

For those institutions and investors to which it applies, the FDIC Policy imposes the following provisions, among others. First, the Bank is required to maintain a ratio of Tier 1 common equity to total assets of at least 10% for a period of three years, and thereafter maintain a capital level sufficient to be well capitalized under regulatory standards during the remaining period of ownership of the investors. This amount of capital exceeds that required under otherwise applicable regulatory requirements. Second, investors that collectively own 80% or more of two or more depository institutions are required to pledge to the FDIC their proportionate interests in each institution to indemnify the FDIC against any losses it incurs in connection with the failure of one of the institutions. Third, the Bank is prohibited from extending credit to its investors and to affiliates of its investors. Fourth, investors may not employ ownership structures that use entities domiciled in bank secrecy jurisdictions. The FDIC has interpreted this prohibition to apply to a wide range of non-U.S. jurisdictions. In its guidance, the FDIC has required that non-U.S. investors subject to the FDIC Policy invest through a U.S. subsidiary and adhere to certain requirements related to record keeping and information sharing. Fifth, without FDIC approval, investors are prohibited from selling or otherwise transferring their securities in the Bank for a three-year period following the time of certain acquisitions. The transfer restrictions in the FDIC Policy do not apply to open-ended investment companies that are registered under the Investment Company Act of 1940, as amended (Investment Company Act) issue redeemable securities, and allow investors to redeem on demand. Sixth, investors may not employ complex and functionally opaque ownership structures to invest in the Bank. Seventh, investors that own 10% or more of the equity of a failed institution are not eligible to bid for that failed institution in an FDIC auction. Eighth, investors may be required to provide information to the FDIC, such as with respect to the size of the capital fund or funds, their diversification, their return profiles, their marketing documents, their management teams, and their business models. Ninth, the FDIC Policy does not replace or substitute for otherwise applicable regulations or statutes.

 

The FDIC Policy applies to our existing stockholders who have agreed to become part of an “anchor group” and it will apply to any other holder of shares of common stock (or group of holders acting in concert) that (i) directly or indirectly owns, controls or has the power to vote more than 5% of the total voting power of the Company, (ii) directly or indirectly owns, controls or has the power to vote 10% or more of any class of voting securities of the Company, (iii) directly or indirectly owns, controls or has the power to vote 25% or more of the total equity of the Company, or (iv) is otherwise deemed to “control” the Company under applicable regulatory standards.

We are subject to the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to material penalties.

 

The Community Reinvestment Act (CRA), the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The Department of Justice and other federal agencies are responsible for enforcing these laws and regulations. A successful challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity, and restrictions on expansion activity. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.

 

Many of our new activities and expansion plans require regulatory approvals, and failure to obtain them may restrict our growth.

 

We intend to complement and expand our business by pursuing strategic acquisitions of the assets and assuming the liabilities of failed banks, banks and other financial institutions. We must generally receive federal regulatory approval before we can acquire an institution or business. In determining whether to approve a proposed acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on the competition, our financial condition, and our future prospects. The regulators also review current and projected capital ratios and levels, the competence, experience, and integrity of management and its record of compliance with laws and regulations, the convenience and needs of the communities to be served (including the acquiring institution’s record of compliance under the CRA) and the effectiveness of the acquiring institution in combating money laundering activities. Such regulatory approvals may not be granted on terms that are acceptable to us, or at all. We may also be required to sell branches as a condition to receiving regulatory approval, which condition may not be acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition.

 

In addition to the acquisition of financial institutions, as opportunities arise, we plan to continue de novo branching as a part of our organic growth strategy. De novo branching carries with it numerous risks, including the inability to obtain all required regulatory approvals or the branch failing to perform as expected. The failure to obtain regulatory approvals for potential de novo branches or those branches to perform may impact our business plans and restrict our growth.

 

Stockholders may be deemed to be acting in concert or otherwise in control of the Bank, which could impose prior approval requirements and result in adverse regulatory consequences for such holders.

 

We are a bank holding company regulated by the Federal Reserve. Any entity (including a “group” composed of natural persons) owning 25% or more of our outstanding shares of common stock, or a lesser percentage if such holder or group otherwise exercises a “controlling influence” over us, may be subject to regulation as a “bank holding company” in accordance with the Bank Holding Company Act of 1956, as amended (BHCA). In addition, (1) any bank holding company or foreign bank with a U.S. presence is required to obtain the approval of the Federal Reserve under the BHCA to acquire or retain 5% or more of our outstanding shares of common stock and (2) any person other than a bank holding company may be required to obtain prior regulatory approval under the Change in Bank Control Act to acquire or retain 10% or more of our outstanding shares of common stock. Any stockholder that is deemed to “control” the Company for bank regulatory purposes would become subject to prior approval requirements and ongoing regulation and supervision. Such a holder may be required to divest 5% or more of the voting shares of investments that may be deemed incompatible with bank holding company status, such as an investment in a company engaged in non-financial activities.

Regulatory determination of “control” of a depository institution or holding company is based on all of the relevant facts and circumstances. Potential investors are advised to consult with their legal counsel regarding the applicable regulations and requirements.

 

Our common stock owned by holders determined by a bank regulatory agency to be acting in concert would be aggregated for purposes of determining whether those holders have control of a bank or bank holding company. Each stockholder obtaining control would be required to register as a bank holding company. “Acting in concert” generally means knowing participation in a joint activity or parallel action towards the common goal of acquiring control of a bank or a parent company, whether or not pursuant to an express agreement. How this definition is applied in individual circumstances can vary among the various federal bank regulatory agencies and cannot always be predicted with certainty. Many factors can lead to a finding of acting in concert, including where stockholders are: commonly controlled or managed; the holders are parties to an oral or written agreement or understanding regarding the acquisition, voting or transfer of control of voting securities of a bank or bank holding company; the holders each own stock in a bank and are also management officials, controlling stockholders, partners or trustees of another company; or both a holder and a controlling stockholder, partner, trustee or management official of the holder own equity in the bank or bank holding company.

 

Risks Related to the Offering

 

There has been no prior public market for our common stock and an active trading market in our common stock may not develop or be sustained.

 

Prior to the offering, there has been no public market for our common stock. Although we intend to apply to have our Class A Common Stock listed on the New York Stock Exchange, we do not know whether third parties will find our common stock to be attractive or whether firms will be interested in making a market for our stock and an active trading market in our common stock may not develop or be sustained after the offering. As a result, stockholders may be unable to liquidate their investments, or may encounter considerable delay in selling shares of our common stock.

 

If equity research analysts do not publish research or reports about our business or if they issue unfavorable research or downgrade our Class A Common Stock, the price of our Class A Common Stock could decline.

 

The trading market for our Class A Common Stock will rely in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts. Equity research analysts may elect not to provide research coverage of our Class A Common Stock, which may adversely affect the market price of our Class A Common Stock. If equity research analysts do provide research coverage of our Class A Common Stock, the price of our Class A Common Stock could decline if one or more of these analysts downgrade our Class A Common Stock or if they issue other unfavorable commentary about us or our business. If one or more of these analysts ceases coverage of the Company, we could lose visibility in the market, which in turn could cause our stock price to decline.

 

Our Class A Common Stock price is likely to be highly volatile and the market price of our Class A Common Stock could drop unexpectedly.

 

The initial public offering price for our Class A Common Stock will be determined through negotiations with the underwriters and such initial public offering price may vary from the market price of our Class A Common Stock after the offering. The market price of our Class A

Common Stock could be subject to wide fluctuations in response to, among other things, the following factors:

 

 

Many of these factors are beyond our control. Any of the foregoing factors could cause our stock price to fall and may expose us to securities class action litigation. Any securities class action litigation could result in substantial costs and the diversion of management’s attention and resources.

 

Material weaknesses in our internal control over financial reporting were identified for the year ended December 31, 2010, as previously reported, and for the six month unaudited interim periods ended June 30, 2011 and 2010. Material weaknesses in our internal control over financial reporting could result in material misstatements in our financial statements and have a material adverse effect on the price of our common stock.

 

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and Section 112 of the Federal Deposit Insurance Corporation Improvement Act of 1991, our management will be required to report on, and our independent registered public accounting firm will be required to attest to, the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. We are currently in the process of establishing, documenting and testing our internal control over financial reporting. We may encounter problems or delays in completing the implementation of any changes necessary to make a favorable assessment of our internal control over financial reporting. In addition, in connection with the attestation process by our

independent registered public accounting firm, we may encounter problems or delays in completing the implementation of any requested improvements and receiving a favorable attestation.

 

A material weakness in our internal control over financial reporting was identified in connection with the audit of our consolidated financial statements for the year ended December 31, 2010, relating to the determination of fair value of certain assets acquired and liabilities assumed and certain related processes, on which we had worked with a third-party consulting firm whose services have now been discontinued. Prior to the discovery of these errors in late 2010 and early 2011, management engaged a new consulting firm to assist in certain valuation and other matters. Management believes that the engagement and assignment of this new consulting firm in conjunction with other corrective actions, including enhancement of policies and procedures and allocation of additional resources, have assisted the Company in the remediation of this material weakness. Appropriate adjustments were made to the consolidated balance sheet and statement of operations of the Company as of and for the year ended December 31, 2010.

 

Material weaknesses in our internal control over financial reporting were identified in connection with the preparation of our unaudited interim consolidated financial statements for the six months ended June 30, 2011 and 2010, which led to adjustments in the Company’s accounting for the FDIC loss share indemnification asset, stock-based compensation and certain expense accruals. These adjustments were made to the unaudited interim consolidated balance sheet and statements of operations of the Company as of June 30, 2011 and for the six month periods ended June 30, 2011 and 2010, respectively. Management believes that these adjustments were the result of weaknesses in its interim financial closing process that existed as of June 30, 2011 and 2010. The Company previously identified substantially all of the weaknesses and had commenced a remediation plan, however, this plan was not fully implemented as of June 30, 2011. Included in the enhancements to controls over the monthly closing process, was the hiring of a new experienced Chief Accounting Officer and other resource realignments, which have been implemented since June 30, 2011. However such enhancements have not been in place for a sufficient period for management to determine their effectiveness in remediating the identified material weaknesses.

 

A material weakness is defined by the standards issued by the Public Company Accounting Oversight Board as a deficiency, or combination of deficiencies, in internal control over financial reporting that results in a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We concluded that as a consequence of the matters described above, a material weakness existed and our internal control over financial reporting was not effective at December 31, 2010. We believe that the material weakness identified as of December 31, 2010 has been remediated. Further, we believe that the actions we have taken to address the weaknesses in internal control over financial reporting in our interim reporting as of June 30, 2011 are sufficient to address such weaknesses. However, no assurance can be given that our internal control is sufficient to prevent additional material weaknesses from occurring in future periods. If additional material weaknesses are discovered in the future, we may fail to meet our future reporting obligations in a timely and reliable manner and our financial statements may contain material misstatements. Any such failure could also adversely affect the results of our periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting. Further, it could cause our investors to lose confidence in the financial information we report, which could adversely affect the price of our common stock.

We will retain broad discretion in using the net proceeds from the offering and we may not promptly deploy the capital raised in the offering. We may not receive a favorable return on our investment of the proceeds of the offering or the proceeds from prior offerings and may not use the proceeds effectively, which could negatively impact our return on equity and the trading price of our Class A Common Stock.

 

Although we expect to use the net proceeds from the offering and from prior offerings for general working capital purposes and to implement our business strategy, including the acquisition of additional depository institutions, we have not designated the amount of net proceeds we will use for any particular purpose. Accordingly, our management will retain broad discretion to allocate the net proceeds of the offering. The net proceeds may be applied in ways with which you and other investors in the offering may not agree.

 

We may not immediately deploy the capital raised in the offering and we have significant funds from our 2009 and 2010 private placement financings that remain undeployed. In the event that we no not immediately deploy the capital raised in the offering, we expect to invest the offering proceeds, and we have invested the proceeds from the prior offerings, in securities until we are able to deploy the proceeds, which provides lower margins than we would expect to earn on loans, potentially adversely affecting equity holder returns, including earnings per share of common stock, return on assets and return on equity. To the extent we are unable to deploy the capital raised in the offering or the prior offerings to our banking operations, our return on such funds may be very low. If return rates decrease on the investments in which we invest such funds, our margin in such funds will be adversely affected.

 

Moreover, our management may use the proceeds for corporate purposes that may not increase our market value or make us profitable. In connection with deploying the funds from the offering or any other funds held by us, management will consider a variety of factors, including the availability of attractive assets and the ability for the Bank to bid for another failed institution in an FDIC auction. There is no guarantee that we will find an attractive opportunity to deploy any such funds and the failure to spend the proceeds effectively or at all could materially and adversely affect our businesses and our consolidated results of operations and financial condition, as well as the trading price of our Class A Common Stock.

 

Purchasers of our Class A Common Stock in the offering will experience immediate and substantial dilution.

 

We expect the initial public offering price of our Class A Common Stock in the offering will be substantially higher than the net tangible book value per share of our Class A Common Stock immediately after the offering. Therefore, if you purchase our Class A Common Stock in the offering, you will incur an immediate dilution of $      in net tangible book value per share from the price you paid, based on an assumed initial offering price of $      per share (the midpoint of the range set forth on the cover page of this prospectus). For a further description of the dilution you will experience immediately after the offering, see the section entitled “Dilution.”

 

A significant portion of our total outstanding shares may be sold into the public market in the near future, which could cause the market price of our Class A Common Stock to drop.

 

We are authorized to issue 150,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of August 31, 2011, there were 37,011,598 shares of common stock and no shares of preferred stock issued and outstanding, which does not include shares of common stock reserved for issuance upon the exercise of outstanding options or warrants or additional shares reserved for issuance under our 2009 Option Plan. In addition, pursuant to the value

appreciation instruments (as described more fully in “Business—Acquisitions”), the FDIC has the right to settle amounts due under such instruments in cash or shares of our common stock covered by registration rights. We expect that the FDIC will settle in cash; however, assuming that the FDIC chooses to settle in shares of our common stock, the number of shares outstanding does not include up to           shares of Class A Common Stock that may become issuable by the Company to the FDIC, assuming a price of $      per share, the midpoint of the range set forth on the cover page of this prospectus. As of August 31, 2011, we had outstanding warrants to purchase 5,452,428 shares of Class A Common Stock, 2,700,501 shares subject to outstanding options and an aggregate of 1,000,659 additional shares of common stock reserved for issuance under our 2009 Option Plan that will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act of 1933, as amended, or Securities Act. Moreover, after the offering and the expiration of the 90-day and 180-day lock-up agreements, holders of an aggregate of approximately     shares of our common stock and     shares of our common stock, respectively, will have rights, subject to some conditions, to require us to file registration statements covering their shares within certain time periods after the offering or to include their shares in registration statements that we may file for ourselves or other stockholders (excluding the shares that may be issued pursuant to the value appreciation instrument agreements entered into by and between the Company and the FDIC in connection with certain of the Acquisitions). We also intend to register all shares of common stock that we may issue under our 2009 Option Plan.

 

Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements and the restrictions imposed on our affiliates under Rule 144. We cannot predict what effect, if any, future sales of shares of our common stock, or the availability of shares for future sale, may have on the trading price of our Class A Common Stock. Future sales of shares of our common stock by our existing stockholders and other stockholders or by us, or the perception that such sales may occur, could adversely affect the market price of shares of our Class A Common Stock and may make it more difficult for you to sell your shares of our Class A Common Stock at a time and price that you determine appropriate. See “Shares Eligible for Future Sale.”

 

In addition, under most circumstances, our Board of Directors has the right, without stockholder approval, to issue authorized but unissued and nonreserved shares of our common stock. If a substantial number of these shares were issued, it would dilute the existing stockholders ownership and may depress the price of our Class A Common Stock. In addition, subject to the rules of the New York Stock Exchange, our Board of Directors has the authority, without stockholder approval, to create and issue additional stock options, warrants and one or more series of preferred stock and to determine the voting, dividend and other rights of the holders of such preferred stock. Depending on the rights, preferences and privileges granted when the preferred stock is issued, it may have the effect of delaying, deferring or preventing a change in control without further action by the stockholders, may discourage bids for our Class A Common Stock at a premium over the market price of the Class A Common Stock and may adversely affect the market price of and voting and other rights of the holders of our Class A Common Stock.

 

To the extent shares of our common stock or preferred stock are issued, or options or warrants are exercised, investors in our securities may experience further dilution and the presence of such derivative securities may make it more difficult to obtain any future financing. In addition, in the event any future financing should be in the form of, or be convertible into or exchangeable for, equity securities, upon the issuance of such equity securities, investors may experience additional dilution.

Provisions in our charter documents and under applicable laws may prevent or delay a change of control of us and could also limit the market price of our Class A Common Stock.

 

Certain provisions of Delaware law and applicable regulatory law, and of our certificate of incorporation and bylaws could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us, even if such a change in control would be beneficial to our stockholders or result in a premium for your shares of our Class A Common Stock.

 

These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:

 

 

In addition, upon the listing of our Class A Common Stock on the New York Stock Exchange, we will be subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware (DGCL), which limits business combination transactions with stockholders of 15% or more of our outstanding voting stock that our Board of Directors has not approved. These provisions and other similar provisions make it more difficult for stockholders or potential acquirers to acquire us without negotiation. These provisions may apply even if some stockholders may consider the transaction beneficial to them.

 

Furthermore, banking laws impose notice, approval and ongoing regulatory requirements on any stockholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution. These laws include the BHCA and the Change in Bank Control Act. These laws could delay or prevent an acquisition.

 

These provisions and laws could limit the price that investors are willing to pay in the future for shares of our Class A Common Stock. These provisions might also discourage a potential acquisition proposal or tender offer, even if the acquisition proposal or tender offer is at a premium over the then current market price for our Class A Common Stock.

Shares of our Class A Common Stock will not be an insured deposit.

 

An investment in our Class A Common Stock will not be a bank deposit and will not be insured or guaranteed by the FDIC or any other government agency. An investment in our Class A Common Stock will be subject to investment risk, and each investor must be capable of affording the loss of its entire investment.

 

We may issue debt and equity securities or securities convertible into equity securities, any of which may be senior to our common stock as to distributions and in liquidation, which could negatively affect the value of our Class A Common Stock.

 

Shares of our Class A Common Stock are equity interests and do not constitute indebtedness. In the future, we may attempt to increase our capital resources by entering into debt or debt-like financing that is unsecured or secured by all or a substantial portion of our assets, or by issuing additional debt or equity securities, which could include the issuance of secured or unsecured commercial paper, medium-term notes, senior notes, subordinated notes, preferred stock or securities convertible into or exchangeable for equity securities. Additionally, we may issue additional debt or equity securities as consideration for future mergers and acquisitions. Such additional debt or equity offerings may place restrictions on our ability to pay dividends on or repurchase our Class A Common Stock, dilute the holdings of our existing stockholders or reduce the market price of our Class A Common Stock. In the event of our liquidation, our lenders and holders of our debt and preferred securities would receive a distribution of our available assets before distributions to the holders of our common stock. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financings. Furthermore, market conditions could require us to accept less favorable terms for the issuance of our securities in the future.

 

We estimate that the net proceeds to us from the sale of our Class A Common Stock in the offering will be approximately $      million, or approximately $      million if the underwriters’ over-allotment option is exercised in full, assuming an initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus. This assumes the deduction of estimated offering expenses of $      million in addition to underwriting discounts and commissions. Each $1.00 increase (decrease) in the assumed initial public offering price of $      per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us of the offering by $      million, or $      million if the underwriters’ over-allotment option is exercised in full, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses. See “Underwriting” for additional information regarding offering expenses and underwriting commissions and discounts.

 

We intend to use the net proceeds from the offering for general corporate purposes, including the acquisition of depository institutions through traditional open bank transactions and failed bank acquisitions with the FDIC, as well as through selective acquisitions of assets, deposits and branches that we believe present attractive risk-adjusted returns or provide a strategic benefit to our growth strategy.

 

We have never paid a cash dividend on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. We intend to retain any earnings to help fund our growth. We anticipate continuing the policy of retaining earnings to fund growth for the foreseeable future.

 

We are a bank holding company and accordingly, any dividends paid by us are subject to various federal and state regulatory limitations and also may be subject to the ability of our subsidiary depository institution(s) to make distributions or pay dividends to us. The ability of the Company to pay dividends is limited by minimum capital and other requirements prescribed by law and regulation. In addition, the OCC Agreement prohibits the Bank from paying a dividend to us prior to January 25, 2013. After January 25, 2013, the OCC Agreement imposes other restrictions on the Bank’s ability to pay dividends to us, including requiring prior approval from the OCC before any such dividends are paid. Banking regulators have authority to impose additional limits on dividends and distributions by the Company and its subsidiaries. Certain restrictive covenants in future debt instruments, if any, may also limit our ability to pay dividends or the Bank’s ability to make distributions or pay dividends to us. See “Supervision and Regulation—Regulatory Limits on Dividends and Distributions.”

 

The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2011. Our cash and cash equivalents and capitalization are presented on an actual basis and on an as adjusted basis as if the offering had been completed as of June 30, 2011. The following should be read in conjunction with “Use of Proceeds,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes that are included in this prospectus.

 

 

 

 

 

If you invest in shares of our Class A Common Stock in the offering, your ownership interest in us will be diluted to the extent of the difference between the initial public offering price per share and net tangible book value per share after the offering. Our net tangible book value as of June 30, 2011 is determined by subtracting the total amount of our liabilities as of June 30, 2011 from the total amount of our tangible assets as of June 30, 2011. Our net tangible book value per share as of June 30, 2011 is determined by dividing our net tangible book value as of June 30, 2011 by the number of shares of common stock outstanding as of June 30, 2011. Our net tangible book value as of June 30, 2011 was $708.3 million, or $19.14 per share, calculated as described above.

 

After giving effect to the issuance in the offering of     shares of Class A Common Stock by us at an assumed initial price to the public of $      per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and the application of our estimated net proceeds therefrom, and after deducting underwriting discounts and commissions and our estimated offering expenses, and the payment of the deferred portion of the placement agent fees to Deutsche Bank Securities Inc. from our 2009 and 2010 private placements of equity interests, our net tangible book value as of June 30, 2011 would have been an aggregate of $      million, or $      per common share. This amount represents an immediate increase of $      per share to our existing stockholders and an immediate dilution of $      per share from the assumed initial price to the public of $      per share to new investors purchasing shares in the offering. The table below illustrates this per share dilution:

 

 

A $1.00 increase (or decrease) in the assumed initial offering price of $      per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (or decrease) the as adjusted net tangible book value as of June 30, 2011 by approximately $      million, or $      per share of Class A Common Stock, and the dilution per share to new investors by $      assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the assumed underwriting discounts and commissions and our estimated offering expenses.

 

The table below sets forth, as of June 30, 2011, the number of our shares of common stock issued, the total consideration paid and the average price per share paid by our existing stockholders and our new investors, after giving effect to the issuance of     shares of Class A Common Stock in the offering at an assumed initial price to the public of $      per share, which is the midpoint of the price range set forth on the cover page of this prospectus:

 

 

 

 

 

 

The following table sets forth certain of our historical consolidated financial data. You should read this information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Capitalization” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus. The selected historical consolidated financial information set forth below at June 30, 2011 and for the six months ended June 30, 2011 and June 30, 2010 is derived from our unaudited financial statements included elsewhere in this prospectus. The selected historical consolidated financial information set forth below at and for the year ended December 31, 2010 is derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected historical results shown below and elsewhere in this prospectus are not necessarily indicative of our future performance.

 

On January 22, 2010, January 29, 2010 and June 25, 2010, we consummated the acquisition of certain assets and assumed certain liabilities, including substantially all deposits, of Old Premier, Old FCB and Old Peninsula, respectively, from the FDIC, as receiver. On February 11, 2011, April 29, 2011, April 29, 2011 and May 6, 2011, we consummated the acquisition of certain assets and assumed certain liabilities, including substantially all deposits, of Old Sunshine, Old FNBCF, Old Cortez and Old Coastal, respectively, from the FDIC, as receiver. Although we were formed in April 2009, our activities prior to our first Acquisition in January 2010 consisted solely of organizational, capital raising and related activities and activities related to identifying and analyzing potential acquisition candidates. We did not engage in any substantive operations (including banking operations) prior to our first Acquisition and, accordingly, have not presented below any consolidated financial data for such period.

 

Our results of operations for the post-acquisition periods of the applicable Old Banks are not comparable to the results of operations of those Old Banks for the pre-acquisition periods mainly due to the fact that the loss sharing arrangements have completely altered the risks associated with the loans and foreclosed real estate of the Old Banks, making historical financial information of the Old Banks immaterial to an understanding of our present and planned future operations. In addition, our business since January 22, 2010 and for the immediate future relies heavily on our acquisition activities, on our loss share resolution business and on the remediation and disposal of assets we acquired from the FDIC and is fundamentally different from the business of the Old Banks. Consequently, information for the applicable Old Banks with respect to the pre-acquisition periods has not been presented. However, the audited statements of assets acquired and liabilities assumed for Old Sunshine, Old FNBCF, Old Cortez and Old Coastal as of the applicable acquisition date are separately presented in the Condensed Consolidated Financial Statements included as part of this prospectus. Results of operations for the post-acquisition periods reflect, among other things, the acquisition method of accounting, accretion/amortization of the FDIC loss share indemnification asset and accretion of accretable discounts on loans acquired.

 

 

 

 

 

 

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Selected Consolidated Financial Data” and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and elsewhere in this prospectus, may cause actual results to differ materially from those projected in the forward-looking statements.

 

Overview and History

 

We are a bank holding company headquartered in Miami, Florida with one wholly-owned national bank subsidiary, Florida Community Bank, National Association (which prior to July 25, 2011 operated under the name Premier American Bank, National Association), which we refer to as the Bank. Through the Bank, we provide a wide range of commercial and retail banking and related financial services to locally owned businesses, professional firms and individuals in Florida.

 

We formed Bond Street Holdings LLC in April 2009 as a Delaware limited liability company for the purpose of becoming a bank holding company and acquiring primarily multiple failed bank asset and liability pools in Florida from the FDIC, as receiver. In late 2009, we raised approximately $440 million from investors in a private placement of our common equity. Since receiving its national bank charter in January 2010, the Bank has acquired certain of the assets and assumed certain of the liabilities of eight failed banks from the FDIC, including three acquisitions in 2010 and five acquisitions in 2011 which are collectively referred to as the “Acquisitions.” Between August and November 2010, we raised approximately an additional $300 million in a private placement of our common equity. In October 2010, we converted from a Delaware limited liability company to a Delaware corporation, Bond Street Holdings, Inc.

 

Before our initial acquisition on January 22, 2010, our principal activities related to the organization of the Company and the Bank, including the filing of an application with the OCC to obtain a shelf charter and contemporaneous applications with the FDIC for deposit insurance and the Federal Reserve for bank holding company approval, performing due diligence on potential failed bank acquisition targets and conducting our private placement financing. The organizational costs incurred during the period from our inception in April 2009 through December 31, 2009 related primarily to legal and consulting fees and totaled $1.6 million. During 2009, neither the Company nor the Bank had any other substantive operations. On January 22, 2010, the Bank completed its initial acquisition of certain of the assets and assumption of certain liabilities of Old Premier from the FDIC, as receiver. In connection with that acquisition, the OCC granted the Bank final approval of its national bank charter, the FDIC approved the Bank’s ability to provide deposit insurance and the Federal Reserve approved the Company’s bank holding company status to complete the acquisition. Because we did not commence banking operations until after our initial acquisition in 2010, a comparison of the years ended December 31, 2009 and December 31, 2010 would not be meaningful and, therefore, is not presented.

 

We completed three acquisitions in 2010 and five acquisitions to date in 2011. We intend to continue our acquisition strategy by selectively identifying, acquiring and integrating depository institutions through traditional open bank acquisitions and failed bank acquisitions with the FDIC. In addition, we may acquire assets, deposits and branches which we believe present attractive risk-adjusted returns or provide a strategic benefit to our growth strategy. Our current asset mix (which is comprised primarily of government agency securities, investment-grade

securities and the legacy loan portfolios that were acquired from the FDIC), loan quality and allowances are not representative of our anticipated future asset mix, loan quality and allowances, which may change materially as we commence meaningful organic origination and banking activities and grow through future acquisitions. Our significant cash reserves and liquid securities portfolio, which result in large part from the proceeds of our 2009 and 2010 private placement financings and cash payments from the FDIC in connection with FDIC-assisted failed bank acquisition transactions, are not necessarily representative of our future cash or liquid assets position. Our cost structure and capital expenditure requirements during the transitional periods for which financial information is available are not reflective of our anticipated cost structure and capital spending as we integrate future acquisitions and continue to grow our organic banking platform. All of the loan portfolios and OREO acquired from six of the eight acquisitions are covered under loss sharing arrangements with the FDIC. We refer to our loans covered under loss sharing agreements with the FDIC as “Covered Loans.” We refer to all other loans as “non-Covered Loans.” Given the FDIC loss share protection for our Covered Loans, our business model since our initial acquisition on January 22, 2010 and for the future relies heavily on our loss share resolution business and on the remediation and disposal of the assets we acquired from the FDIC, rather than interest earned on loans and other assets.

 

The Bank had a network of 44 branches as of August 31, 2011, located in key Florida markets in a geographic footprint that extends from Naples to Sarasota, and further to Brooksville, on the west coast of Florida, from Miami to Daytona Beach on the east coast of Florida and to Orlando in central Florida. In addition to traditional lending and deposit gathering capabilities, we offer a comprehensive range of traditional banking products and services to individuals, small and medium sized businesses, and other local organizations and entities in our market areas. As of June 30, 2011, consolidated assets totaled approximately $3.1 billion, customer deposits totaled approximately $2.1 billion and stockholders’ equity totaled approximately $733.4 million.

 

Summary of Acquisition and Loss Share Accounting

 

We determined current fair value accounting estimates of the acquired assets and liabilities for the Acquisitions in accordance with accounting requirements for fair value measurement and acquisition transactions as promulgated in FASB Accounting Standards Codification (ASC) Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, FASB ASC Topic No. 805, Business Combinations, Business Combinations) and FASB ASC Topic 820, Fair Value Measurements and Disclosures. The determination of the initial fair value of loans purchased in an acquisition and the initial fair value of the related loss share indemnification asset involves a high degree of judgment and complexity. The carrying value of the acquired loans and the loss share indemnification asset reflect management’s best estimate of the amount to be realized on each of these assets. However, the amount the Bank realizes on these assets could differ materially from the carrying value reflected based upon the timing and amount of collections on the acquired loans in future periods.

 

Management has determined the initial fair values of the Old Sunshine, Old FNBCF, Old Cortez and Old Coastal acquisitions. However, these values are subject to change during the one year measurement period allowed under ASC 805. The FDIC loss share indemnification asset is accreted into non-interest income using the level yield method over the estimated life of the indemnification asset. Accounting standards prohibit carrying over an allowance for loan losses, or ALL, for impaired loans purchased. Any discount is accreted into interest income on a method that approximates level yield over the estimated life of the related loans. We believe that our non-accretable difference (discounts representing amounts that are not expected to be collected from the customer and liquidation of collateral) represents probable losses on the loan portfolio at the time of acquisition, and we expect that non-accretable difference to

largely offset our losses on the acquired loans. Nonetheless, to the extent that additional impairment occurs on these assets, we will recognize a provision for loan losses related to the probable loss associated with the impaired pool of loans or specific loan. If the loan is a Covered Loan, the Bank will recognize in earnings an offsetting income on indemnification asset resulting from impairment of Covered Loans equal to the FDIC share of the loss under the specific loss sharing agreement covering the impaired loans. Furthermore, we have recorded accretable discounts (discounts representing the excess of a loan’s cash flows expected to be collected over the carrying value of the loan) which are expected to provide for market yields on the Covered Loans as of the date of acquisition. We recorded both the purchased assets and the liabilities assumed at their respective acquisition date fair values. We also recorded goodwill when the fair value of liabilities assumed exceeded the fair value of assets acquired.

 

We expect the loss sharing agreements will have a material effect on our cash flows and operating results in both the short term and the long term. In the short term, we believe it is likely that a significant amount of the Covered Loans will become delinquent and there will be inadequate collateral to repay the loans upon liquidation of the collateral. Management believes that the Company has established sufficient non-accretable discounts on both the Covered Loans and OREO, collectively referred to as Covered Assets, representing the expected losses compared to their acquired contractual payment amounts. As a result, our operating results would only be adversely affected by loan losses on Covered Assets to the extent that those losses exceed the expected losses reflected in the fair value at the acquisition date or if we lose FDIC loss share protection.

 

The effects of the loss sharing agreements on cash flows and operating results in the long term will be similar to the short-term effects described above. The long-term effects will depend primarily on the ability of borrowers to make required payments over time. As the loss sharing agreements cover up to a 10-year period (five years for loans other than single family residential mortgage loans), changing economic conditions will likely affect the timing of future charge-offs and the resulting reimbursements from the FDIC. Management believes that any recapture of interest income and recognition of cash flows from borrowers or amounts received from the FDIC (as part of the indemnification asset) may be recognized unevenly over this period, as we exhaust our collection efforts under our normal practices.

 

In our consolidated statement of operations, the covered expenses incurred to manage and dispose of Covered Assets are fully expensed as non-interest expense and the 80%, 50% or 95%, as applicable, reimbursed by the FDIC under the applicable loss sharing agreement is recognized as non-interest income, resulting in a 20%, 50% or 5%, as applicable, net effect to pre-tax earnings. We include these covered expenses in our quarterly reporting to the FDIC, and the FDIC reimburses us for them under the terms of the loss sharing agreements.

 

Asset, Liability and Loss Sharing Agreements Information
(As of Respective Dates of Acquisition)
(dollars in thousands)

 

 

The above information has been derived solely from the pro forma schedules issued by the FDIC with respect to the acquisitions of such failed banks by the Bank and does not include fixed assets and other property that have been purchased at fair market value in the periods following the closure of the respective failed banks. Neither does it include fair value adjustments recognized in conjunction with acquisition accounting. Accordingly, the above information should not be relied on as a complete summary of the historical financial position of the Old Banks.

 

2010 Acquisitions

 

Old Premier

 

On January 22, 2010, the Florida Office of Financial Regulation closed Old Premier and appointed the FDIC as receiver. That same day, the Bank assumed $262.8 million of Old Premier’s deposits and acquired $298.3 million of Old Premier’s assets from the FDIC under a whole-bank purchase and assumption agreement with loss sharing. Pursuant to the terms of the Old Premier loss sharing agreement which covers approximately $293.1 million of Old Premier’s assets, the FDIC will cover 80% of losses on the first $94 million of losses and cover 95% of losses exceeding $94 million on all Old Premier Covered Assets. Recoveries on the Old Premier Covered Assets are shared with the FDIC on the same percentage basis as losses. The loss sharing arrangements for commercial and other assets and single family residential loans are in effect for five years and 10 years, respectively, and the loss recovery provisions are in effect for eight years and 10 years, respectively, from the acquisition date. At the time of acquisition, the Bank recorded an indemnification asset from the FDIC of $82.5 million, which represented the estimated fair value of the FDIC’s portion of the losses that we expected to be incurred and reimbursed to us as of that date.

 

On the January 22, 2010 acquisition date, the estimate of the contractually required principal and interest payments receivable for all impaired loans acquired from Old Premier was $308.3 million, and the estimated fair value of those loans was $174.5 million. At the acquisition date, we established a credit risk discount (non-accretable difference) of $115.3 million on the loans, representing amounts not expected to be collected from the customer or from the liquidation of collateral. Based on our assumptions for estimated cash flows for the loans of Old Premier, we also recorded an accretable discount of $28.3 million relating to the loans, which represents the undiscounted cash flows expected to be collected in excess of the estimated fair value of the acquired loans.

 

In connection with the acquisition of Old Premier, we entered into an equity appreciation agreement with the FDIC. The Company has recorded the estimated fair value as of June 30, 2011 of $144,690 for the Old Premier equity appreciation agreement as a liability. See “Business—2010 Acquisitions—Old Premier” for more information regarding the Old Premier equity appreciation agreement.

 

Old FCB

 

On January 29, 2010, the Florida Office of Financial Regulation closed Old FCB and appointed the FDIC as receiver. That same date, the Bank assumed $588.4 million of Old FCB’s deposits and $525.3 million of Old FCB’s assets from the FDIC (certain other assets of Old FCB were kept by the FDIC and did not pass to the Bank) under a modified whole-bank purchase and assumption agreement with loss sharing. Pursuant to the terms of the Old FCB loss sharing agreement which covers $299.0 million of Old FCB’s assets, the FDIC will cover 80% of losses on the first $141 million of losses and cover 95% of losses exceeding $141 million on all Old FCB Covered Assets. Recoveries on the Old FCB Covered Assets are shared with the FDIC on the

same percentage basis as losses. The loss sharing arrangements for commercial and other assets and single family residential loans are in effect for five years and 10 years, respectively, and the loss recovery provisions are in effect for eight years and 10 years, respectively, from the acquisition date. At the time of acquisition, the Bank recorded an indemnification asset from the FDIC of $86.5 million, which represented the estimated fair value of the FDIC’s portion of the losses that we expected to be incurred and reimbursed to us as of that date.

 

On the January 29, 2010 acquisition date, the estimate of the contractually required principal and interest payments receivable for all impaired loans acquired from Old FCB was $282.3 million, and the estimated fair value of those loans was $176.1 million. At the acquisition date, we established a credit risk discount (non-accretable difference) of $95.0 million on the loans. In our assumptions for estimated cash flows for the loans of Old FCB, we also recorded an accretable discount of $25.1 million relating to the loans.

 

In connection with the acquisition of Old FCB, we entered into an equity appreciation agreement with the FDIC. The Company has recorded the estimated fair value as of June 30, 2011 of $192,530 for the Old FCB equity appreciation agreement as a liability. See “Business—2010 Acquisitions—Old FCB” for more information regarding the Old FCB equity appreciation agreement.

 

Old Premier and Old FCB Financial Information

 

As a result of the loss sharing agreements with the FDIC the risks associated with the loans and foreclosed real estate of Old Premier and Old FCB have been completely altered, making historical financial information of Old Premier and Old FCB immaterial to an understanding of our present and planned future operations and financial results. In addition, our business since January 2010 and for the immediate future relies heavily on our acquisition activities and our loss share resolution businesses and on the income generated from the remediation and disposal of assets we acquired from the FDIC and it is fundamentally different from the businesses of both Old Premier and Old FCB. In light of the foregoing and because we did not succeed to substantially all of the business of Old Premier or Old FCB in those acquisitions, we have determined that Old Premier and Old FCB are not the predecessor entities of the Company, and we have therefore omitted historical financial statements of Old Premier and Old FCB in this prospectus and our audited consolidated financial statements, except for the statements of assets acquired and liabilities assumed included in the financial statements to this prospectus.

 

Old Peninsula

 

On June 25, 2010, the Florida Office of Financial Regulation closed Old Peninsula and appointed the FDIC as receiver. That same date, the Bank assumed $604.5 million of Old Peninsula’s deposits and acquired $622.6 million of Old Peninsula’s assets from the FDIC under a whole-bank purchase and assumption agreement with loss sharing. Pursuant to the terms of the Old Peninsula loss sharing agreement which covers $425.6 million of Old Peninsula assets, the FDIC will cover 80% of losses on all Old Peninsula Covered Assets. Recoveries on the Old Peninsula Covered Assets are shared with the FDIC on the same percentage basis as losses. The loss sharing arrangements for commercial and other assets and single family residential loans are in effect for five years and 10 years, respectively, and the loss recovery provisions are in effect for eight years and 10 years, respectively, from the respective acquisition dates. At the time of acquisition, the Bank recorded an indemnification asset from the FDIC of $135.8 million, which represented the estimated fair value of the FDIC’s portion of the losses that we expected to be incurred and reimbursed to us as of that date.

 

On the June 25, 2010 acquisition date, the estimate of the contractually required principal and interest payments receivable for all impaired loans acquired from Old Peninsula was $437.8 million, and the estimated fair value of those loans was $239.8 million. At the acquisition date, we established a credit risk discount (non-accretable difference) of $182.4 million on

the loans. In our assumptions for estimated cash flows for the loans of Old Peninsula, we also recorded an accretable discount of $32.4 million relating to the loans.

 

In connection with the acquisition of Old Peninsula, we entered into a value appreciation instrument agreement with the FDIC. The Company has recorded the estimated fair value as of June 30, 2011 of $305,500 for the Old Peninsula value appreciation instrument agreement as a liability. See “Business—2010 Acquisitions—Old Peninsula” for more information regarding the Old Peninsula value appreciation instrument agreement.

 

SAB Topic 1:K Waivers

 

On March 23, 2011, the SEC granted us a waiver from the requirements to file financial statements otherwise required under Rule 3-05 of Regulation S-X, with respect to our acquisition of Old Peninsula, in accordance with the guidance provided in Staff Accounting Bulletin Topic 1:K, Financial Statements of Acquired Troubled Financial Institutions (“SAB 1:K”). SAB 1:K provides relief from the requirements of Rule 3-05 of Regulation S-X under certain circumstances, such as the acquisition of Old Peninsula, where a registrant acquires a “troubled financial institution” (as defined in SAB 1:K) for which audited financial statements are not reasonably available and in which federal assistance is so pervasive as to substantially reduce the relevance of such information to an assessment of the registrant’s future operations.

 

On July 22, 2011, the SEC granted us a similar waiver with respect to our acquisitions of Old Sunshine, Old FNBCF, Old Cortez and Old Coastal in accordance with the guidance provided in SAB 1:K. Set forth below is certain information regarding the assets we acquired and liabilities we assumed in our acquisitions of each of Old Sunshine, Old FNBCF, Old Cortez and Old Coastal, respectively, from the FDIC, as receiver. For additional information regarding the impact of the acquisitions on the Company’s capital, see “Capital Resources” below. On September 1, 2011, the SEC granted us a similar waiver with respect to our acquisition of Old FPB.

 

2011 Acquisitions

 

Old Sunshine

 

On February 11, 2011, the Florida Office of Financial Regulation closed Old Sunshine and appointed the FDIC as receiver. That same date, the Bank assumed approximately $110.5 million of Old Sunshine’s deposits and acquired $114.6 million of Old Sunshine’s assets from the FDIC under a whole bank purchase and assumption agreement. Unlike the 2010 acquisitions, the Bank did not enter into a loss sharing agreement in connection with the purchase of Old Sunshine’s assets. However, the Bank’s bid contained a significant discount for the purchased assets, which was intended to offset the probable losses and expenses relating to Old Sunshine’s loan and other real estate portfolios, expected carrying costs for the nonperforming assets and the costs to manage the portfolios, in this case, without loss share protection.

 

On the February 11, 2011 acquisition date, the estimate of the contractually required principal and interest payments receivable for all impaired loans acquired from Old Sunshine was $107.5 million, and the estimated fair value of those loans was $64.1 million. At the acquisition date, we established a credit risk discount (non-accretable difference) of $30.5 million on the loans. Based on our assumptions for estimated cash flows for the loans of Old Sunshine, we also recorded an accretable discount of $12.9 million relating to the impaired loans.

 

In connection with the acquisition of Old Sunshine, we entered into a value appreciation instrument agreement with the FDIC. The Company recorded the estimated fair value of the Old Sunshine value appreciation instrument agreement as a liability at the acquisition date, which amounted to $130,000. See “Business—2011 Acquisitions—Old Sunshine” for more information regarding the Old Sunshine value appreciation instrument agreement.

Investments

 

Investment securities acquired in the Old Sunshine acquisition at February 11, 2011 (dollars in thousands):

 

 

The following table shows contractual maturities and yields of investment securities of Old Sunshine at February 11, 2011. For purposes of the maturity table, mortgage-backed securities, which are not due on a single maturity date, have been included in maturity groupings based on the contractual maturity (in thousands).

 

 

Loans

 

At the time of acquisition, loans that have experienced deterioration since origination such that it is probable that the borrower will not be able to make all contractually required payments are classified as impaired. These loans are accounted for using ASC 310-30 accounting standards. All remaining loans are classified as non-impaired.

 

Contractual cash flows and fair value of acquired Old Sunshine loans at February 11, 2011 (in thousands):

 

 

 

 

At the acquisition date, we estimated the fair value of the loan portfolio at $66.9 million. The Old Sunshine loan portfolio was not covered by loss sharing agreements with the FDIC, and, therefore, there were no Covered Loans in connection with the acquisition of Old Sunshine.

 

Deposits

 

Deposit liabilities assumed in the Old Sunshine acquisition, including the fair value adjustment, at February 11, 2011 (in thousands):