Earning Interest

Now is the time to feel valued by banks. They’re striving to earn your trust, your loyalty and your business, knowing that your ultimate goal is financial security. 

Once-stable financial institutions have fallen or been acquired by outsider banks that have had their sights set on Southwest Florida. New banks have launched with pristine balance sheets and capital to lend. And while existing banks are holding onto customers, some are bracing for spikes in problem commercial loans. 

“Right now it looks like we’re probably going to have a rough stretch here for the next 12 to 24 months, where we’ll probably have another bank or two or more fail or be absorbed,” says Shelton Weeks, professor of real estate in the Lutgert College of Business at Florida Gulf Coast University. “We’re in a much more precarious situation than other areas in the state—than any other area in the country.” 

That’s largely because the fortunes of local and regional banks are tied to the fortunes of the real estate market, and Howard Finch, department chairman of economics and finance in FGCU’s College of Business, says the industry’s immediate future hinges on the commercial real estate market. Expected commercial defaults will lead to more local and regional bank failures—their penalty for not diversifying. That’s where new banks have the advantage, he adds. “They don’t have the baggage in their loan portfolios.” 

Newcomers tout their capital, but still need to gain the community’s trust and find qualified borrowers. Out-of-town banks that have retained key personnel when acquiring local banks have a more seamless transition because of those existing community ties, Finch says. Those that imported their executives from other parts of the country haven’t had a chance to make in-roads in the local community. “That’s something they’re facing down the road,” he adds. 

Holding onto and growing deposits is key, especially for banks that need the source of funds for lending activity after acquiring the assets and deposits of shuttered institutions, while cherry-picking the good loans and letting the Federal Deposit Insurance Corporation, or FDIC, deal with the bad loans. 

“They don’t want to have deposits walk out the door because that is going to restrict their future lending capability,” Finch says. 

In the past, some banks have relished opportunities to boost the trust factor by speaking in local media, but five banks, including newcomers and existing local institutions, declined to be interviewed for this report. 

Five other bankers, however, shared their insights on the state of the local industry and its outlook for 2010. 

THE ESTABLISHED BANKS

TIB Bank
IB Financial Corp., the parent company of TIB Bank and Naples Capital Advisors Inc., is dealing with about 6 percent of its loans nonperforming as it’s managing through the fifth year of a severe economic downturn in South Florida. Community banks continue to prove that they follow the difficulties of their customers, says TIB Financial CEO and President Thomas J. Longe. 

“Our nonperforming loans are up considerably,” he says. “Relative to our peers, we’re doing much better, pretty much because of the historical nature of the bank. While we did some construction and development loans, that wasn’t the makeup of our bank.” 

He acknowledges that those loans are causing some difficulty, but TIB Financial has strengthened its position in the market by acquiring the deposits last year of the failed Riverside Bank of the Gulf Coast. That allowed TIB to pick up strong core deposits, making it the No. 1 community bank in terms of assets ($1.7 billion) in the markets it serves, Longe says. 

TIB had an advantage in that it was in this market before the acquisition. Newcomers have the challenge of developing roots in the community, he says. “We need to see [those bank executives] at the Rotaries and the Kiwanis and all the events.” 

For Naples-based TIB, which has been in existence for 35 years, the focus hasn’t changed. “As a community bank, you have to be there to support your communities because that’s the only way your community will come out of this economic environment,” he says. 

“We’ve never stopped lending,” he adds, although not as many lending opportunities exist, because fewer would-be borrowers are able to show cash flow and collateral. TIB looks for a strong track record with a customer, demonstration of cash flows and their ability to service their debt, he says. “Our underwriting has never really changed.” 

Although he’s seeing some signs of stabilization in the residential real estate market and increasing liquidity in terms of home sales, “it’s still going to be difficult,” he says. “We’re going to lag the rest of the country.” 

Edison National Bank
CEO Robbie Roepstorff sees the physical marks of the region’s battered banking landscape: The same buildings that housed failed banks now bear the signs of their replacements. “I don’t have a clue who some of them are, and I’m a banker,” she says. “It makes me to stop and say, ‘Who is Iberia Bank, who is Central Bank, who is Synovus Bank?’ It’s an adjustment. I hope that there becomes a real community attachment. You have to understand our community, know the needs of our community.” 

Roepstorff hopes the banks will bring the expertise that made them financially stable to expand to Southwest Florida—as well as their out-of-town clients. 

Edison National, which turns 13 in August, is the oldest community bank chartered in Lee County. That’s a bittersweet distinction for Roepstorff, who has seen good friends in the banking industry pushed out of their positions because of forces sometimes beyond their control. “It has been a challenge to absolutely everyone,” she says.

Roepstorff credits her bank’s directors, each with a minimum of 20 years of banking experience, for keeping the business on track with what she describes as a conservative but community-minded spirit. 

“No good company is going to be here for the long term if they’re not consistent, day in and day out,” she says. “When people were making money hand-over-fist, we kept our blinders on and stayed consistent.” 

Edison National wasn’t burdened by the underperforming loans that other banks experienced because of the decisions to stay away from subprime lending, not pay commissions for loan production and resist a heavy concentration of loans in construction and development. 

As a result, Edison National didn’t need or want the federal Troubled Asset Relief Program (TARP) funding, which other banks pursued in 2009. “We were absolutely dead set against that. We felt that the government should not be bailing banks out,” she says. “It shouldn’t be you, as a taxpayer, bailing banks out.” 

Edison is open to opportunities to acquire failed banks, but Roepstorff says the bank is happy with the three key locations—south Fort Myers, downtown Fort Myers and its Bank of the Islands on Sanibel—that it targeted when the bank was formed. 

“We’re not going to be the biggest,” she says. “We’re strategically in the key locations that we wanted to be.” 

THE STARTUP

First National Bank of the Gulf Coast has a way to go before it starts making money. The bank opened in October, and most start-ups don’t begin seeing a profit until at least their third year of operation. 

One key the newbie has going for it is the veteran banking team of Gary Tice and state Sen. Garrett Richter, who want to prove that if anyone can succeed with a new bank in these difficult times, it’s them. 

First National acquired two-year-old Panther Community Bank in Lehigh Acres on Oct. 23 to fulfill an FDIC requirement to approve its charter. It opened in the Naples market three days later, with about $37 million in net capital and, as Tice points out, no bad loans. 

“[Panther was] very, very healthy. That’s why we bought them. We bought a bank that had no credit problems, and to this date, has no credit problems,” he says. “We scoured Southwest Florida and we found the bank that we thought was the right fit for us.” 

The acquisition of the bank, which had struggled with loan demand and to maintain deposits, immediately enhanced First National’s capital position and helped save money to hire and train employees. 

Tice says First National has exceeded expectations, growing from $82 million to $140 million in total assets as of March, with no advertising or special offers on CD rates. “Are we making money? No. But we’re improving every quarter,” he says. 

Loan generation continues to be sluggish because qualified borrowers are scarce. The bank is concentrating on commercial businesses, automobile loans, home-equity loans and short-term “jumbo loans.” (Jumbo loans are residential loans that exceed loans that can generally be sold on the secondary market, with a minimum of $417,000; the bank does not exceed a $3 million jumbo loan at this time.) 

The bank determines qualified borrowers by evaluating “the three Cs”—cash flow, collateral and character. 

“We are, I would have to say, as tough as everyone in the market [in lending],” he says. “The difference is we are making loans if they’re qualified [while others are not]. If they’re not qualified, we don’t make the loan. We look at everything that matters in making sure we get our loan payback.” 

In addition to retaining some of the Panther staff, the bank employs 65 staff members from Tice and Richter’s former venture, First National Bancshares of Florida, which eventually merged with Fifth Third Bancorp. Many of the bank’s customers are those who recall the level of service at First National of Florida, and now they see familiar faces in the new bank’s two offices, in Naples and Lehigh Acres. These days, personal service may be even more important to customers who question whether their bank will be open tomorrow. 

“Every employee understands that the only reason they get paid is because of the customer,” Tice says. “Everybody that comes to work for us has to have a passion to provide superior customer service, or they don’t last long.”

Although Tice didn’t envision that he would have to buy a bank in order to open a new bank, the new First National is open to potential mergers, or “partnerships,” as he calls them. 

“But our strategy is we’re going to look at organic growth first, and then second we’re going to look at opportunities in the market in Southwest Florida, and to do that we’ll have to raise more capital. We think we can raise more capital when the time is right.”

THE NEWCOMERS

Premier American Bank NA/ Florida Community Bank
Kent S. Ellert believes the name of a bank has value for customers, even if it’s a failed bank. 

“There is a lot in the name. It implies at the highest level where the bank is headquartered, where decisions are made for the clients, and the relationship the bank has with the community,” says Ellert, a local banking veteran who is president and COO of Premier American Bank and Florida Community Bank. 

Investment group Bond Street Holdings LLC, which has ties to Naples, raised $440 million in initial capital and invested $135 million in the acquisitions of Premier American Bank in Miami and, a week later, in Immokalee-based Florida Community Bank. 

Through the arrangement, Premier American Bank acquired certain assets and deposits of Florida Community Bank on Jan. 29 after the FDIC shut it down, enabling Premier to make a giant first step into the Southwest Florida market. It kept all 11 Florida Community branches open and under the same name in recognition of the company’s history dating to 1923. 

“For us, Florida Community Bank is a brand that should be praised for being one of the first banks in Collier County.”

Ellert, a former executive locally with Wachovia and Fifth Third South Florida, expects additional South Florida acquisitions in the near future. “We are a unique bank charter in that we were established for the express purpose of recapitalizing Florida banks to build a strong, healthy community-banking franchise in Florida,” he says. “We believe there’s an opportunity to make a bank that has had difficulty due to market conditions become healthy again. There is an opportunity as a very strong-capitalized community bank to grow in the marketplace.” 

The acquisition of failed banks, through the assistance of the FDIC, is “one of the fundamental solutions to helping the banking-industry recovery in Florida,” he says. 

From January to March, Florida Community Bank grew by $25 million in core deposits to more than $600 million. Clients have stayed with the bank or even returned, he says. 

“In my experience, the No. 1 concern of customers during a merger transition such as this is the retention of their banker,” he says. “In both banks, we kept 100 percent of the customer-facing employees. That’s given great comfort to the client base.” 

Ellert believes there’s a commercial market base to be tapped with customers underserved in Collier, causing the bank to focus on commercial and industrial lending that supports the region’s small and mid-sized businesses. 

“We believe in all the markets that we serve there are good customers,” he says. “Many are right here within the bank. Many are within other institutions.”

Mutual of Omaha Bank
On the heels of establishing its first Florida office in Naples at the end of January, Mutual of Omaha Bank expanded its local operations by acquiring the deposits and assets of Marco Community Bank, the 17th FDIC-insured institution to fail in 2010 in the United States and the third in Florida. 

It immediately faced the challenge of convincing Marco customers that it wanted to be a part of the community and support its growth. What made it easier, says Kevin Hale, executive vice president and director of community banking for Mutual of Omaha Bank, is that he and John Clark, the market president, have been in the area for decades. Hale points out that during his 32 years in the region, he’s worked for banks with offices on Marco Island in roles as high as president. Based in Naples, Hale will oversee the bank’s network of full-service banks in Arizona, California, Colorado, Florida, Nebraska, Nevada and Texas and will oversee Mutual of Omaha Bank’s nationwide wealth management group. 

“We’re not just reading a credit file and making decisions based on what we see in that particular document. We know these people,” he says. “We can pick up the telephone and call them. And believe me, they call us.” 

Marco Community Bank had approximately $119.6 million in total assets and $117.1 million in total deposits as of Dec. 31, and Hale says he is in the “enviable position” of not having the negative issues that most of his competitors are facing. 

“[Competitors’] losses have eroded their capital base. They’re forced to try and raise additional capital,” he says. “I wake up every morning with a very positive attitude because we’re doing new business, we’re making loans, we’re not working out loans. I see opportunities rather than problems.” 

Mutual of Omaha had a presence in the area before taking over Marco Community Bank, making residential mortgage loans from its Naples office for about a year, and started with commercial loans when it opened its full-service office in January. 

“The advantage that we have in a new market like Marco Island is that we should be perceived immediately as the bank that’s ready, willing and able to make loans to small businesses, individuals who want to buy homes and builders who have solid contracts to build new homes for individuals. We’ve got money to lend,” Hale says. 

The bank is looking to loan to businesses that can show they are profitable, stable and growing, which can be a tough set of requirements right now. Its deposit base has grown to $204 million in Florida (Mutual of Omaha has $3.7 billion deposits nationwide). Naples Market President John Clark said the Naples Mutual of Omaha Bank, which opened on Jan. 29, recently reached $9.5 million in deposits. Meanwhile, the volatile “brokered deposits” that Marco Community Bank took on went away after the acquisition because Mutual of Omaha wasn’t willing to pay those rates, he says. Banks use this type of funding, with brokered deposits typically coming from outside the area, if they are having difficulty acquiring new deposits in their local market. 

The Marco location was the bank’s 39th in seven states. It was scheduled to open a Tampa office in April and is looking for a couple of Fort Myers locations. More acquisitions could be on its growth path. 

“We have an opportunity to take a look at all of the banks that make it to the FDIC problem-bank list of liquidation,” he says. “We certainly like Southwest Florida.”