Money Matters

>>Florida Gulf Bank saw deposits grow from $200 million to $300 million in 2005, but last year, they began to taper off; 2006 deposits increased to approximately $325 million, far below the 50 percent surge of the year before.

The culprit: the downturn in the residential real estate market.

"That growth took off at nearly the same rate in the beginning of 2006. It came to not an abrupt halt, but the rate of growth slowed down tremendously," says Bill Valenti, president and founder of Florida Gulf Bank. "We definitely saw a dramatic change."

Some local banks are reeling from declines in single-family residential lending and construction loan business, and they're remaining cautious about 2007. Add that to continuing competition for deposits, rising interest rates and people funneling money back into the stock market, and banks can't expect to have the record years they've recently experienced, says Harlan Parrish, president and CEO of Colonial Bank-Southwest Florida Region, which posted nearly 28 percent growth in deposits from adding new customers, not acquisitions, in 2005.

"It's going to be a challenging year for the financial services industry, without a doubt," he says.

Parrish expects Colonial Bank's residential lending business to cool tremendously this year and possibly into 2008. "This selling season will really tell a lot as far as how many people are coming back here and buying," he says.

Just as those in the real estate industry say that 2004-2005 saw an unusually robust market, bankers say those years were an anomaly in their industry as well. John Moran, president and CEO of Riverside Bank of the Gulf Coast, says his bank's production in 2006 rivaled what it experienced in 2003, with roughly the same number of lenders and support staff. But compared with 2005, residential loan production was off 50 percent.