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Miami Daily Business Review
Puerto Rico's No. 2 Bank Ups Stake In PanAmerican
April 27, 2004
Miami Daily Business Review
One of Puerto Rico's largest banks is increasing its investment in a tiny community bank in Hollywood, sparking speculation that the Caribbean island's No. 2 bank may be planning to take over the local institution.
Banking analysts say that First BanCorp Puerto Rico's infusion of an additional $600,000 into PanAmerican Bancorp is a sign the $13 billion-asset institution wants a foothold in South Florida in the near future. Most of First BanCorp's competitors already have a local presence.
PanAmerican executives acknowledge that First BanCorp could acquire their institution but deny that they have any immediate plans to sell.
"Please don't assume that they are our golden parachute," said James Partridge, PanAmerican's chairman. "We are not in the market to sell this bank at this point in time. We are in the market to grow a very profitable organization."
But PanAmerican Bank president and chief executive Hugo Castro doesn't mind the endorsement. PanAmerican disclosed First BanCorp's 8.6 percent equity stake in the prospectus for a proposed $10 million stock offering this spring.
"We are just about ready," Castro said. "We are just awaiting [regulator] approval. We are talking about weeks."
Castro said PanAmerican would use the funds from the stock offering for growth, acquisitions and increased lending limits as it strives to be a $1 billion bank within five years.
PanAmerican Bank has $80 million in deposits and six branches scattered throughout South Florida. The bank is the combination of three troubled institutions. Southern Security Bank of Hollywood bought PanAmerican Bank of Miami in 2002 and took its name. It bought Gulf Bank of Miami in February of this year.
FirstBank, a subsidiary of First BanCorp, is a 55-year-old institution based in Santurce, with 43 branches and $6.8 billion in deposits on the island. The bank has 12 additional branches in the U.S. Virgin Islands.
First BanCorp also owns an insurance company and the Money Express remittance company. The bank has nearly $1 billion in equity capital.
Shares of First BanCorp (NYSE: FBP) traded at $39.94 at 2 p.m. Monday for a market capitalization of $1.6 billion, according to Yahoo! Finance.
First BanCorp has agreed to pay $4.75 per unit - consisting of one share and two warrants - for 125,000 shares of PanAmerican and the option to buy 250,000 more shares within five years.
PanAmerican shares (OTCBB: PBCD.OB) traded Monday at $3.60, unchanged from the Friday close.
First BanCorp's equity stake in PanAmerican will remain at about 8.6 percent of the outstanding shares even if it exercises future options, according to the April 14 Federal Reserve application. By remaining below 10 percent, First BanCorp is not required to file additional paperwork with bank regulators or the Securities and Exchange Commission.
First BanCorp did not return several calls to its headquarters seeking comment.
Analysts speculate the move is part of First BanCorp's strategy to expand to the fast-growing Florida banking market from a saturated Puerto Rico market.
"Puerto Rico is a pretty small island," said banking analyst Bain Slack of Keefe Bruyette & Woods in New York. "There are only so many directions they can go in terms of growth. There are a lot of good banks down there, and the competition is getting better."
Florida is poised to become the next battleground for Puerto Rico-based banks looking to grow their revenues by targeting Puerto Ricans and other Hispanics.
Banco Popular, Puerto Rico's largest local bank, is already in Florida with 10 locations, including one in Miami. Last summer, R&G Premier Bank of Puerto Rico purchased the 14-branch Crown Bank franchise in Central Florida.
"They are all going to have to look to the mainland to keep their growth rates at the levels that they have had for the past several years," Slack said.
First BanCorp embarked on an expansion in 2002 when it acquired the banking and insurance business that J.P. Morgan Chase Bank of New York operated in the U.S. Virgin Islands.
The acquisition boosted First BanCorp's branches from four to 10 on St. Thomas and St. Croix. First BanCorp also gained its first location on the island of St. John.
When it purchased the U.S. Virgin Islands branches, First BanCorp suddenly pulled into a tie for market share with Banco Popular, according the Federal Deposit Insurance Corp.
First BanCorp's investment in PanAmerican also demonstrates confidence in PanAmerican's leadership, especially the PanAmerican holding company's president and chief executive Michael Golden, an analyst speculated.
Golden has experience raising funds for banks. He chaired the investment-banking firm First Colonial Securities Group in Boca Raton before joining PanAmerican Bancorp in May 2002.
His firm underwrote more than 10 initial public offerings, including the $13 million IPO of the former Palm Beach Gardens-based Admiralty Bank in 1998.
"What it sounds like is that First BanCorp has concluded that Golden is a big money maker, which he probably is," said the analyst who asked not to be named. "If he is a winner, they are going to make money."
First BanCorp became involved with PanAmerican Bank in 2001 when Partridge, a longtime Puerto Rico banker, was raising capital for an investment group that wanted to acquire the troubled Southern Security Bank in Hollywood.
Partridge, the former chairman of Visa International's Latin American and Caribbean division, convinced his friend and First BanCorp chairman Angel Alvarez-Perez to invest in the company.
"We were struggling to get enough capital so we could buy this," said Partridge, who worked 18 years as a banker in Puerto Rico for institutions including Banco Popular and Banco Credito. "He has steadfastly kept his position."