Earning It

If banks are a reflection of the communities they serve, then consider that fact another sign that the regional economy from Tampa to Naples is recovering.

Earnings at banks headquartered from Pasco to Collier counties rose significantly in the third quarter and the year-to-date. Assets have grown too, suggesting bankers are making loans again.

“I think the improving numbers among the community banks in Southwest Florida is reflective, frankly, of the improving economy,” says Tramm Hudson, a 32-year banking veteran on the Gulf Coast who was most recently Florida president of Stearns Bank.

To varying degrees, many bankers on the Gulf Coast report increased loan demand, more creditworthy customers seeking loans and stable real estate collateral values. Banks are setting aside less money for future losses and getting rid of bad loans.

Investors are taking note. “There are a number of deals right now where some of the weaker banks have been able to attract capital,” says Hudson, who now consults with some of the region's community banks.

Recent significant deals include IberiaBank's acquisition of Florida Gulf Bank in Fort Myers, American Momentum Bank's purchase of Southshore Community Bank of Appollo Beach and LandMark Bank of Sarasota, First National Bank of the Gulf Coast's purchase of Royal Palm Bank in Naples and C1 Bank's agreement to buy Doral-based U.S. Century Bank.

The economic recovery is broad-based, says Bill West, chairman of the Bank of Tampa and president and CEO of the bank's holding company, Tampa Bay Banking Co. “We're doing at least $1 million a month in new-construction loans,” he says.

Borrowers with good credit are starting to use the cash they've saved through the downturn, says Sam Davis II, president and chief operating officer of American Momentum Bank in Tampa. “Many well-heeled borrowers saw an opportunity to acquire land for a good price,” he says.

Joseph Caballero, president and CEO of Gulfshore Bank in Tampa, says industries such as hospitality, auto dealers and food and beverage are among those leading the recovery. “Businesses that made it through the downturn picked up market share from competitors,” he says.

To be sure, there are still significant hurdles to a full recovery. Indeed, what politicians do to curtail banks with more regulatory burdens may have a significant impact on whether community banking in Florida will continue to exist in its present form.

Earnings shine again
Many community banks that posted losses during the downturn are making money again. In many cases, they don't have to set aside as much money for future losses, so this directly benefits the bottom line.

“That means credit quality is getting better,” says Kerry Westbrook, senior vice president and chief financial officer with First National Bank of Pasco in Dade City. “It doesn't matter what you're earning if you have hidden problems. Most banks have been working hard, cleaning up and putting a smile on their face.”

On the islands of Sanibel and Captiva in Lee County, Craig Albert, president and CEO of Sanibel Captiva Community Bank says problem loans have declined significantly as real estate values and sales recovered. “We're moving a lot of our foreclosures,” he says.

Property values are stabilizing and in some cases increasing, which gives bankers more confidence about the underlying loan collaterals. “We're not seeing appraisals with values dropping,” says Caballero.

Fact is, few banks are in dire straits today like they were just two years ago. A recent bank asset-quality report by investment banking firm Carson Medlin found just three banks out of 26 from Sarasota to Naples with significant problem loans. In the Tampa Bay area, three of 31 banks show significant problem loans.

In addition, some banks built large portfolios of bonds during the downturn to protect themselves against potential future losses. As the bond market spiked in recent years from the Federal Reserve's easy money policies, banks have been selling those bonds and reporting significant gains.

Banks are making money with traditional lending, too. For example, American Momentum Bank wasn't saddled with bad loans because it began operations six years ago. “We opened the bank not long before things went downhill, so we took a pretty conservative stance early on,” says Davis.

During the downturn, American Momentum could lend when its competitors were busy managing problem loans. “That started to build a very solid base of customers for the bank and earnings have grown from those relationships over the years,” says Davis.

Lately, Davis says the bank has financed projects such as hospitals, nursing centers and senior housing. “We financed a number of large apartment complexes and those have done exceptionally well,” he says.

The improving economy is spurring some banks to expand. For example, Bank of Tampa plans to open its first branch in Pinellas County later this month in downtown St. Petersburg. It will open two additional branches in undisclosed Pinellas locations next year. “We've seen this as a time to be more aggressive,” says West. “This year and next year we will have added 5% to our employment.”

In Naples, shareholders at First National Bank of the Gulf Coast approved the formation of a holding company, TGR Financial, to make acquisitions. Chairman and CEO Gary Tice says he's exploring opportunities from Orlando to Tampa and Naples.

In addition, Tice says the holding company makes it easier to create subsidiaries such as wealth management or insurance companies. “We're not going to rush into it,” Tice cautions. “We're going to take our time.”

Into the market
Banks headquartered outside the region have been expanding into Southwest Florida, too. For example, Fort Lauderdale-based Stonegate Bank has acquired four banks on the Gulf Coast from Tampa to Naples in recent years.

“This year in Southwest Florida there's increasing competition,” says Pablo Veintimilla, executive vice president and market president for Southwest Florida with Stonegate. “There were quite a few banks that weren't lending, but now we are seeing more and more competition as these banks have improved.”

But the pie is growing. “The good news is our commercial customers are telling us activity has picked up in the last six months,” Veintimilla says. “As far as new customers, we are seeing some additional demand.”

Investors and business owners have been hoarding cash during the downturn and they're starting to explore ways to spend that now. “A lot of people are asking for loans,” says Keith Short, market president for IberiaBank in Naples. “In Naples I've seen a lot of vacant lots that have been picked up and people are building.”

Short says larger super-regional banks like Louisiana-based IberiaBank are benefiting from deposit growth in cash-rich Florida. “What I hear from clients is that folks are very careful about where they put their dollars and where they want to bank,” he says. “Because it made a difference in the downturn.”