Capital intensive

By: 
Jan. 20, 2017

Consider 1997 the year Florida's banking industry witnessed the equivalent of a gust of wind on a dandelion. That's the year NationsBank announced it would buy Barnett Banks, Florida's largest homegrown banking institution for $15.5 billion.

Gary Tice, a 40-year veteran of Florida's banking industry and chairman and CEO of First Florida Integrity Bank in Naples, says many Barnett bankers subsequently left NationsBank to form community banks throughout the state. That dandelion-like effect sparked a community bank boom through the early 2000s. “It was one of the things that kicked it off,” he says.

Indeed, the government's green light for interstate banking and the Barnett deal sparked a frenzy of bank formations and acquisitions that culminated when Fifth Third Bank acquired Tice's Naples-based First National Bankshares of Florida for $1.6 billion in early 2005, a record 6.5 times tangible book value. At the time of the sale, First National had grown to become the largest bank-holding company in Florida with $5.3 billion in assets, $3.9 billion in deposits and 77 branches stretching from the Tampa Bay area and Orlando to Sarasota, Fort Myers and Naples.

When the deal closed, Tice rued signing a four-year non-compete agreement. But looking back now, he says he's grateful for having stayed out of banking until 2009 when he started a bank now called First Florida Integrity with longtime First National banking partner, former state Sen. Garrett Richter.

Many Florida community banks weren't so fortunate with their timing. Because real estate is the bread and butter of community banking in Florida, the real estate collapse took many of them down.

Some failures were spectacular, such as the regulators' closure of Orion Bank in November 2009 and the failed bank's sale to IberiaBank of Louisiana. At the time, Naples-based Orion reported $2.7 billion in assets and $2.1 billion in deposits as a result of the lending boom, and it had quickly become one of the largest banks on the Gulf Coast.

The recession took its toll. There are only 25 banks headquartered today in the region that stretches from Pasco County to Collier County with assets of less than $500 million, according to data from the Federal Deposit Insurance Corp. In March 2006, there were 64 community banks in that category.

Even compared with 20 years ago, the number of community banks has dwindled. Statewide, there were 81 banks with assets between $100 million and $300 million in 1997. Today there are only 50, according to FDIC data.

A new bank hasn't been chartered in Florida in six years, according to data from the Florida Office of Financial Regulation. “The biggest hindrances to opening banks today are that the return isn't there and the regulatory environment is challenging,” says Tice.

Tice recalls starting his first bank in 1985 with just $3.5 million in capital. “I don't believe that today you can start one with less than $25 million in capital,” he says.

What's more, burdensome federal regulations that require banks to add administrative compliance staff, combined with ultra-low interest rates, makes it tough for smaller community banks to grow earnings. Some bankers say that it's hard to be a profitable, growing bank with less than $1 billion in assets.

Congress and President Donald Trump are considering scaling back financial regulations, but bankers say it could take years to unwind the complex patchwork that has evolved over time. “There's probably some relief in the regulatory world, but I don't think it'll come quickly,” says Tice, whose First Florida Integrity has $1.2 billion in assets. “I don't think you'll see a lot of [new banks] in the future.”


20 Years: By the numbers
Banking

The number of community banks has fallen dramatically since 1997, many victims of the real estate recession. To the right is a chart showing select summary data for all commercial banks in Florida with assets between $100 million and $300 million, the traditional niche for community banking ($ in 000s).

12/31/1997 9/30/2016
Number of banks 81 50
Total employees 6,301 1,865
Total assets 13,923,271 9,133,991
Net loans and lease 7,893,875 6,048,612
Total deposits 11,914,064 7,786,550
Total equity capital 1,248,012 973,893
Undivided profits 602,115 56,662

20/20 vision

Fueled by massive population growth, key Florida industries have gone through massive transformations in the past two decades

Commercial real estate

Homebuilding

Health care

Technology

Tourism