It took a long time for Teachers Insurance and Annuity Association of America to get all the regulatory approvals it needed to complete its acquisition of Jacksonville-based EverBank Financial Corp.
The deal was completed Friday, 10 months after it was first announced, and after the long wait it’s reasonable for shareholders to ask: Was this a good deal for us?
It’s an especially interesting question because of the bank stock rally that occurred last fall after Donald Trump won the presidential election.
TIAA agreed in August to buy EverBank for $19.50 a share, representing a 25.8 percent gain over EverBank’s closing price of $15.50 on July 22, before news leaked out that the company was considering a buyout.
Ironically, EverBank shareholders approved the deal at a special meeting on Wednesday morning, Nov. 9, just hours after the election results came in. Did those shareholders miss out by locking in the $19.50 price in November?
Bank stocks rallied in the months after the election on speculation that Trump would push financial deregulation policies that would benefit banks. One of the most widely watched bank stock indicators, the KBW Bank index, jumped 47.8 percent from that July 22 date to its peak in March.
Bank stocks have fallen back recently on sentiment that Trump’s policies will not benefit the sector as much as hoped, but the KBW index was still about 37 percent higher last week than its July 22 level as the EverBank sale closed.
While we don’t know if EverBank would have been able to negotiate a better price with better timing, yes, it seems EverBank shareholders did miss out on a potential Trump bump.
Fed looks differently at TIAA-EverBank
The Federal Reserve Board’s order last week approving the TIAA-EverBank merger had some interesting observations.
The central bank, which has regulatory authority over bank holding companies, normally evaluates merger applications for their impact on competition in local markets. But EverBank and TIAA’s bank subsidiary are not normal financial institutions.
With $18.9 billion in deposits, EverBank would control 3.7 percent of the total insured deposit market in Florida, the Fed said. However, a large amount of those deposits are from outside the state.
Although EverBank has 10 bank branches in Florida, most of its business is done through the internet.
TIAA, which provides financial services for people in the academic, research, medical, cultural and government fields, doesn’t have any physical branches and does all of its banking business through the internet.
“Both institutions solicit deposits from across the country, making it unlikely that either institution holds a high concentration of Internet deposits in any local market,” the Fed’s order said. The Fed doesn’t have actual data on the amount of internet deposits in specific markets.
“Based on the size of the institutions, the large number of Internet-based competitors, and the diffuse geographic nature of the Internet deposits of EverBank and TIAA, the proposed transaction would not result in a material increase in concentration in any single market, including any in which EverBank has a physical location,” it said.
The Fed said the merged bank, with about $23.3 billion in deposits, has less than 1 percent of the deposits in the entire country.
The internet banking focus also affected the Fed’s evaluation of the banks’ obligations under the Community Reinvestment Act, which mandates banks serve the needs of their local communities.
TIAA’s bank is headquartered in St. Louis, and the Fed said it received one complaint about TIAA’s lending record to minorities in the St. Louis area and EverBank’s record in certain Florida markets.
However, the banks asserted they do business nationally and shouldn’t be judged on loans in any particular market.
The Fed agreed, finding the banks are complying with the CRA and the banks are meeting the “convenience and needs” of customers.
The companies still haven’t decided on the ultimate name for the merged bank. TIAA announced Monday morning that the bank’s legal name is TIAA, FSB. But it said “for the immediate future,” it will continue using brand names TIAA Direct and EverBank.
ACFC downgraded on ‘weak mix’
The buyout of EverBank leaves Atlantic Coast Financial Corp. as the largest bank holding company headquartered in Jacksonville.
Ameris Bancorp doesn’t count because, while its executive offices are in Jacksonville, its official headquarters is in Moultrie, Ga.
The one analyst who follows Atlantic Coast Financial, Bob Ramsey of FBR Capital Markets, downgraded the company Friday from “outperform” to “market perform.”
Ramsey’s downgrade was based on an assessment of the deposit mixes of banks, and how rising rates may impact them.
“The company does not rank well in our scorecard given high-cost deposits, a weaker deposit mix (lots of CDs, few demand deposit accounts), and a high loan/deposit ratio, which may all contribute to greater funding cost pressures as rates rise,” Ramsey said in his report.
He also said EverBank has been impacting Atlantic Coast Financial.
“ACFC is seeing increased competition locally from EverBank promotions possibly given the pending acquisition,” he said, as well as competition from other large regional banks.
“ACFC has been willing to pay a little more because deposit growth is a priority, and it targets a lower loan/deposit ratio.”
FIS jumps in Fortune 500
After growing with the late 2015 acquisition of SunGard Data Services Inc., Jacksonville-based Fidelity National Information Services Inc., or FIS, made one of the biggest jumps in the Fortune 500 this year.
The magazine’s annual list of the nation’s largest companies showed FIS rose by 91 spots to rank 301st, based on its 2016 revenue of $9.24 billion. That was the sixth highest gain of any company in the list.
FIS’ revenue rose 40.1 percent last year, largely because it had SunGard’s business for the full year.
Fidelity National Financial Inc., which spun off FIS a decade ago, also moved up in the rankings from 311th in 2015 to 293rd last year, with revenue of $9.55 billion.
However, Fidelity will drop in the rankings next year because it plans to spin off its majority interest in Black Knight Financial Services Inc. and also spin its investment subsidiary into a new public company called Cannae Holdings Inc.
Fidelity’s title insurance business still produced revenue of $6.85 billion last year without the revenue from Black Knight and Cannae, which would have put the company 391st in this year’s list.
Of course, both companies trail Jacksonville’s third Fortune 500 company, CSX Corp., which ranked 257th with $11.07 billion in revenue.
However, CSX dropped from 239th in 2015 as its revenue fell 6 percent last year.
Jacksonville had one other company in the Fortune 1000 listing, Landstar System Inc. at 699th with $3.17 billion in revenue. But like fellow transportation company CSX, Landstar slipped from 672nd as revenue fell 5 percent.
Jacksonville would have one more Fortune 500 company if Southeastern Grocers would go public.
The parent company of Winn-Dixie and three other supermarket chains has annual revenue above $10 billion, according to many industry reports. But since it doesn’t make public financial disclosures, it is not included in the Fortune rankings.
FNF and Black Knight detail spinoff plan
Fidelity and Black Knight on Friday announced an agreement on the plan to distribute Fidelity’s majority stake in Black Knight to Fidelity shareholders.
Fidelity owns 83.3 million of Black Knight’s total 154.2 million shares outstanding. Those shares will be distributed at an exchange rate of 0.305551 Black Knight shares for every Fidelity share.
The distribution is expected to be completed in the third quarter.
Michaels earnings disappoint
The Michaels Cos. reported lower than expected earnings for its first quarter, sending its stock to its lowest level in more than two years.
The Texas-based arts and crafts retailer, which has a distribution center in Jacksonville, reported earnings of 38 cents a share for the quarter ended April 29, 2 cents higher than last year but a penny lower than the average forecast of analysts, according to Zacks Investment Research.
Net sales of $1.16 billion were even with last year but lower than the average forecast of $1.18 billion. Comparable-store sales (sales at stores open for more than one year) fell by 1.2 percent.
Michaels’ stock fell $1.67 to $18.16 Tuesday after the earnings report and fell as low as $17.49 by Thursday morning, its lowest level since November 2014. That also dropped the stock close to its June 2014 initial public offering price of $17.
Michaels is forecasting sales growth of 2.2 percent to 3.7 percent for the full fiscal year, with comparable-store sales ranging from a decline of 0.2 percent to an increase of 1.3 percent.
The company operates 1,364 stores across the U.S. and Canada under the brands Michaels, Aaron Brothers and Pat Catan’s.